"I was stupid," Gales says, sitting in the living room of her one-bedroom apartment. "I did it on my own, but it was a bad mistake. It just turned into a mess."

Gales' debts were eliminated after her pastor intervened and a lawyer sued the lenders.

But critics of payday lenders say that outcome is rare for the thousands of South Carolinians who take out payday loans each year. Those critics want tougher state restrictions on the sky-high-interest-rate lenders or an outright ban.

Payday lenders say most of their borrowers are responsible and don't get caught in a spiral of debt.

Government should not step in to limit consumers' choices, they add. They say their service allows people to get small amounts of money at a cost that is less than a chain of bounced checks or utility cutoff fees.

This week, nearly 10 years after it legalized payday lenders, the S.C. General Assembly is on the verge of deciding whether to restrict them.

At 9 a.m. Thursday, a House subcommittee will hear testimony from consumer credit counselors and loan companies on a bill passed Feb. 19 by the Senate.

The Senate's proposal could go into law if it passes the House, differences are worked out between House and Senate leaders, and it is signed by the governor.

If no action is taken before the session ends in June, the bill will die.

Payday lenders are under attack in other states as well.

They have been pushed out of business in Georgia, North Carolina, Pennsylvania and Oregon in recent years.

This year, New Hampshire and Virginia have passed laws restricting payday lenders. Arkansas' attorney general suspended payday lenders' activities in March and ordered them to forgive outstanding loans, alleging they violated that state's constitution.

There is other heat as well:

• Former borrowers in South Carolina and five other states have filed class-action suits against Spartanburg-based Advance America, the nation's largest payday lender. Several S.C. legislators, some of them sponsors of the bill restricting the industry, represent the former borrowers in one of the suits.

• The worsening economy is forcing more and more borrowers to default, increasing lenders' charge-offs for bad loans and cutting into their profits.

• The S.C. Baptist Convention and the S.C. Conference of the United Methodist Church -- the state's two largest denominations -- passed resolutions last year condemning predatory lending.

'Something's wrong'

Gales didn't have a history of debt troubles. In fact, she had little experience with debts at all.

She had been driving a 1984 Pontiac that she had bought used for $900 in cash. But it was breaking down. Her church, First Baptist of Mullins, gave her a 1999 Chevrolet Lumina.

Her husband died in June 2006.

Gales had no children, no close relatives. For the first time in her life, she had no one to help her. At age 56, Gales never had signed a mortgage or borrowed money for a car.

A few weeks after her husband's death, Gales took out a title loan for $815 on the Chevrolet. The loan required her to repay $2,625 over 12 months or lose the car.

Gales started having trouble making the $219 a month title loan payments, so she took out payday loans. She made 10 title loan payments and then lost her car. On top of that, her payday debts had climbed to more than $1,400 -- her total income for two months.

"Stupid me," Gales said. "I knew I shouldn't have done it, and I've regretted it every day since."

Over six months, Gales took out 18 loans with payday lenders.

When Gales told her pastor, the Rev. Jim Kirkland of Mullins First Baptist Church, what had happened, he was outraged that many of the companies had been willing to lend $600 at a time to a woman on a fixed income of $700 a month.

"They loaned her as much as her total monthly income in the same day," he said. "They said they had lending criteria. What criteria? The bottom line is they have no criteria.

"Something's wrong."

'An exception to the rule'

Most of the loans were through three of the nation's biggest payday lenders: QC Holdings, based in Overland Park, Kan., and owner of Express Check Advance of South Carolina; Check Into Cash, based in Cleveland, Tenn.; and TitleMax, based in Savannah and owner of CheckMax.

TitleMax and Check Into Cash are privately owned. Efforts to reach them were unsuccessful.

Tom Linafelt, a spokesman for QC Holdings, said his company doesn't lend more than a person's gross income and tries to work with customers who have trouble repaying their loans.

"The vast majority of our customers repay their loans without trouble," Linafelt said. "She's an exception to the rule."

The Rev. Kirkland put Gales in touch with Nate Fata, a Surfside Beach lawyer who handles consumer cases.

On July 23, 2007, Fata filed a suit on behalf of Gales against Express Check Advance of South Carolina, CheckMax and Check Into Cash.

"The plaintiff has no ability to pay these loans," the suit said. "She is on a fixed income and is disabled. She subsists on very frugal spending and has absolutely no extra money.

"The defendants knew or should have known the plaintiff could not repay the loan when due by virtue of not having enough income during the loan term," it said.

CheckMax replied to the lawsuit in August, asking the judge to order the issue into arbitration, saying Gales had signed a document waiving her rights to contest the contract in court.

In early October, Check Into Cash and Express Check Advance settled with Gales. CheckMax followed a month later.

By the time she sought help, Gales had five unpaid payday loans. Fata wouldn't say how many were paid or forgiven in the settlement.

For the 13 prior loans she did pay, Gales carried an average balance of $1,052 over 88 days, paying back $1,502 in principal plus $573 in interest. That's the equivalent of a 226 percent annual percentage rate.

'Un-Christian practices'

As Gales' problem loans were resolved, Kirkland began working on a resolution for the S.C. Baptist Convention calling for laws to curb "predatory" lending, "characterized by unscrupulous, unethical and un-Christian lending practices that include excessively high fees, interest rates and balloon payments."

"Customers of predatory lenders are being trapped in an endless cycle of high interest loans," the resolution said.

The S.C. Baptists passed the resolution at their annual meeting last November in Florence.

The resolution on predatory lending prompted Advance America to request a meeting with convention leaders.

Early this year, Kirkland and Joe Mack, director of public policy issues for the S.C. Baptists, met with Advance America spokesman Jamie Fulmer and other company officials in Columbia as the S.C. Senate prepared to take up a bill to bar or limit the industry.

"They talked about how great they are and what a necessary service they offer," Kirkland said. "We agreed to disagree."

Fulmer said he arranges meetings across the state to address public misperceptions about payday lending and thwart efforts to enact restrictions that, he says, would kill the industry.

"If you eliminate this product," Fulmer said, "you haven't eliminated the consumer need for the product. They'll go to more expensive options.

"Consumers are far more endangered by the high credit card balances they run up than their $300 payday loan."

'Any and all ... means'

Some of those arguments were supported by members of the S.C. Senate during hours of debate Feb. 19 on a bill to restrict payday lenders.

But, in the end, the S.C. Senate passed a bill that would limit the size and number of loans payday lenders could issue to individual borrowers. The bill also includes a database to help state regulators enforce the law.

From the Senate, the bill went to the S.C. House Banking and Consumer Affairs Subcommittee of the Labor, Commerce and Industry Committee.

The subcommittee voted April 9 to strip a lending cap from the bill.

The Senate version would have required lenders to limit the size of each loan to no more 25 percent of a borrower's gross income for the two weeks of the loan. Those earning more than $2,000 over two weeks would be limited to a $500 loan, the maximum allowed for any borrower.

The subcommittee raised the cap to $600 and stripped the income test, saying the state should defer to the judgment of borrowers and lenders.

Back in Mullins, one of Gales' former lenders has resumed contact with her.

In March, CheckMax sent her a letter saying she could repay half of her "remaining balance" settled by her lawsuit or face collection efforts.

"If you do not respond to this letter by April 1, 2008, we will have little choice but to continue to collect on your account using any and all available civil means, including the possible institution of a civil lawsuit against you."

Gales had stacked the letters on a table by her living room chair. Her pastor learned of them last month during a visit.

Fata, Gales' lawyer, has contacted CheckMax.

"They're so used to going after people," Fata said. "Even after you get out of the trap, they're still trying to set up another."