It took Linda Medlock four years and $8,000 to pay off the $500 she borrowed from a payday lender to make her mortgage payment.

“I still believe that they are the new loan sharks of the 21st century,” she said.

Stories of quick cash and high interest rates like Medlock’s are driving legislation at the Capitol this year to sock it to “predatory lenders.”

“Not even the mob can charge as high of interest rates,” said Rep. Mark Ferrandino, a Denver Democrat who announced a bill Thursday that would muzzle the industry. “This legislation will help hardworking men and women in Colorado who are living paycheck to paycheck.”

In what they say is the toughest crackdown on payday lenders in the nation, lawmakers want to cap the annual interest rate on payday loans at 36 percent and prohibit lenders from giving people with unpaid loans more money. Lenders would have to check a database to see whether customers are already in debt.

A trade association said the “payday lending reform act” is so strict, hundreds of lenders in Colorado could go out of business if it becomes law.

Lawmakers said the average payday loan in Colorado is $343, with average finance fees of $544. Lenders can charge $60 for a $300 loan for two weeks. The average annual interest rate for a loan in Colorado is 350 percent.

Senate President Peter Groff said that in his north Denver district, there are a disproportionate amount of payday lenders — especially in low-income neighborhoods.

“Many Coloradans are caught in this debt trap,” Groff said. “It’s time these outfits stopped enriching themselves on the backs of our most vulnerable citizens.”

Capping the annual interest rate at 36 percent is unfair because payday loans are typically for two weeks, not a year, said Lyndsey Medsker, spokeswoman for Community Financial Services Association, whose members operate about 180 stores in Colorado.

“That’s effectively a ban on the industry,” she said. “If you apply an annual rate to a two-week loan, it just doesn’t work.”

Under current law, payday lenders can charge about $17 to lend $100 for two weeks, she said. The proposed legislation would drop that to $1.38.

“They would lose money,” Medsker said.

She also disagreed that lenders should turn away customers with unpaid loans. Their only options then are to not pay their bill and get a late fee, bounce a check or borrow from a friend or family member, Medsker said.

Since 2003, payday loans in Colorado have increased 117 percent. More than 70 percent of short-term loans went to borrowers with at least 11 loans in the previous year.

Jennifer Brown: 303-954-1593 or jenbrown@denverpost.com