Controversy is the word of the day in Springfield as state legislators consider new stricter regulations on pay day lending services that provide cash advances on paychecks for consumers that are strapped for cash.

“I refer to them as ‘loan sharks.'” said a former customer of a payday lending service near Northern Illinois University. “People who don’t make that much money … we can’t go to the bank for a loan so we have to resort to this [payday lending] but I think they are taking advantage of people that shouldn’t be taken advantage of.”

Currently, there is barely any regulation on the services but consumer protection agencies say the regulation is insufficient and long overdue. They also claim the services are charging too much for the simple act of providing the loan.

In fact, an informal survey of four payday lending stores in Oak Park and Forest Park averaged a $48 charge for every $100 of loan – approximately half the amount of the loan itself.

“It’s been a problem over the last few years,” said Alan Alop, an attorney of Legal Assistance Foundation of Metropolitan Chicago. “And the number of customers in debt grows everyday.”

The road to Springfield began as an idea in 1999, when, after hearing a story from one of his parishioners who was victimized by a payday loan, Monsignor John Egan convened the “Msgr. John Egan Campaign for Payday Loan Reform.”

Over the past six years, the campaign won the support of over 60 co-sponsors that include Citizen Action Illinois and Community Financial Services Association, which represents more than 200 payday loan stores in Illinois.

And some believe that the six years of campaign may reach an important milestone very soon.

“We’ve been working on this [reform] for six years and I believe that the House Bill 1100 will provide a way for the lenders to continue their service without putting customers in financial difficulties,” said Lynda DeLaforgue, co-director of Citizen Action Illinois.

House Bill 1100, also known as the Payday Loan Reform bill is currently before the house for consideration.

The Payday Loan Reform bill will be the second attempt to control payday lending practices in Illinois since an unsuccessful bill that was passed during Gov. George Ryan’s term.

Consumer protections in the Payday Loan Reform bill include a maximum fee cap of $1,000 and a mandatory recovery period to allow consumers to easily break out of the debt cycle created by back-to-back loans.

In addition, the bill will introduce a repayment plan that allows 56 days for customers with loans unpaid for more than 35 days to pay the loan without any additional fees or interests.

However, the bill has not gone unchallenged.

Some small private lenders worry that the bill will put them at an unfair economic disadvantage against national lenders.

“House Bill 1100 will open doors for the big national corporations to flood the market and eventually put the small lenders out of business,” said Gary Mack, the spokesperson of Small Loans Association.

For Mack it is a matter of competition: the bill will result in smaller revenue for every lender. The national corporations have adequate capital to absorb the decrease in profit but the small lenders will be forced out of the market.

“After the small businesses are out, the national corporations will follow a new model where they will make loans under a national bank charter which the state cannot regulate … then they can charge any interest rate, even up to an astronomical level,” Mack said.

Some lenders believe the reform is necessary for the well-being of the industry as a whole.

“You hear horror stories from customers in the papers very often … it’s not good for the industry,” said Toni Colletti, executive vice president of Community Financial Services Association of America. “The basic disagreement is: more money now and risk the future stability of the lending industry or less money now for a secure future.”

Bob Vondrasek, the executive director of South Austin Coalition said the bill is necessary but, at the same time, compromising to the economic needs of the lenders.

“Some people want to eliminate them”period”but I think the good sense in the bill is that it’s not an attempt to wipe them out but more of a compromise” he said.

DeLaforgue said she believes the bill will pass.

State Senator Don Harmon said the major focus at the moment should be refining an agreement between the consumer advocates and the lenders.

“I think they are very close [to reaching an agreement],” he said.

Key consumer protections in the Payday Reform Bill include:

• A fee cap to reduce the cost of using payday loans
• An industry-wide cap on borrowing to prevent over-borrowing
• Repayment plan to help borrowers in multiple "roll-overs."