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Payday lenders told lawmakers Tuesday that a proposal to limit interest rates and place other restrictions on their businesses would doom their form of short-term lending in Nebraska.

"Forget about a job killer, it would be an industry killer," said Brad Hill, president of the Nebraska Financial Service Association, a trade group of payday lenders.

Hill predicted his company, EZ Money, would close all but one or two of its nine Nebraska stores if the state enacted the limitations included in a bill co-sponsored this year by Sens. Tony Vargas of Omaha and Lou Ann Linehan of Elkhorn.

Hill's testimony came during a hearing on the bill (LB194) before the Legislature's Banking, Commerce and Insurance Committee.

The bill's supporters said while payday lenders provide a critical source of credit for people in a financial pinch, current regulations have allowed those businesses to become predatory. Supporters argued lawmakers have a moral responsibility to protect borrowers from interest rates that can reach upward of 400 percent over the course of a year.

"Put simply, this industry, as it exists, currently takes advantage of vulnerable Nebraskans," Vargas said.

He insisted his bill is a more moderate version of a 2010 Colorado law that forced about half that state's payday lenders out of business.

Payday loans allow people to borrow against their paychecks or some other type of regular income.

Vargas' bill would cap interest rates at 36 percent but allow lenders to charge an additional $20 monthly maintenance fee. It also would limit monthly payments to 5 percent of the borrower's gross monthly income and cap total loan charges at 50 percent of the original loan amount.

Supporters took up a vast majority of Tuesday's three-hour hearing.

More than half a dozen borrowers shared their lending stories and said Vargas' measure would give people more time to pay off the loans, helping them avoid taking out additional payday loans to cover debt. 

"Once you get into that cycle, it's very hard to get out," said Charles Karpf, a longtime banker who has spent 13 years as manager of the Nebraska Rural Community Federal Credit Union in Morrill. 

Committee members aimed pointed questions at the bill's supporters, quizzing borrowers on whether they had considered all other options before turning to payday loans.

Sen. Paul Schumacher of Columbus and others wondered aloud whether government should get involved.

Nebraska government created the situation in the first place two decades ago by exempting payday lenders and similar businesses from the state's overall interest rate cap, said Nick Bourke, director of consumer finance at Pew Charitable Trusts. Now those companies are "hard code" in state law.

One man said he has appreciated the occasional financial boost provided by payday loans, including one after he was hurt on the job.

"Everybody has a time in their life where they're down and out," said Virgil Parks Jr. of Omaha. "I got up on my feet. I paid that loan off."

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Reach the writer at 402-473-7234 or zpluhacek@journalstar.com.

On Twitter @zachami.

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Assistant city editor

Zach Pluhacek is an assistant city editor.

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