Senator Kirsten Gillibrand, D-N.Y., is proposing legislation aimed at putting an end to current payday lending practices by giving some banking services a new home: the U.S. Post Office.

The legislation, called the Postal Banking Act, would make retail banking services available at all U.S. Postal Service locations. That amounts to 30,000 post offices nationwide.

Services would include small-dollar loans for consumers that offer low fees and low interest rates.

Those transactions would compete with payday loans, a short-term advance that typically comes due with your next paycheck.

The terms for payday loans are often unfavorable, said Alex Horowitz, senior research officer for the consumer finance project at Pew Charitable Trusts, an independent research organization.

About 12 million individuals use payday loans annually, according to Horowitz. The average loan is $375 for a period of five months, which accrues about $520 in fees, he said.

"These loans are extraordinarily expensive with annual percentage rates near 400 percent," Horowitz said.

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Payday loans are often provided by small credit merchants to individuals who face high prices and unaffordable payments, Horowitz said. That includes households that hold traditional bank accounts but cannot access such transactions through those institutions. It also includes a smaller portion of households that do not have bank accounts at all.

Last October, the Consumer Financial Protection Bureau authorized banks and credit unions to provide small dollar loans, as long as consumers have more than 45 days to repay the money. Those institutions have the capability to offer loan rates that are six times lower than available payday loans, according to Horowitz.

But those institutions still need the go ahead from their respective regulators in order to provide these loans. While the regulator each institution answers to varies, they include the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation and the National Credit Union Administration.

A spokesman for the CFPB declined to comment, citing the agency's policy to not comment on pending legislation.