RICHMOND -- Both chambers of the General Assembly passed legislation Thursday to put new restrictions on the payday lending industry and help borrowers caught in a "cycle of debt" to avoid taking out multiple loans.

The Senate and House of Delegates approved identical bills (Senate Bill 588 and House Bill 12) that would create a complex fee structure for borrowers, extend repayment periods and limit the number of sequential loans a borrower can obtain.

The House voted 91-9 to approve its bill, while the Senate voted 37-3.

Legislators hope the measure will finally resolve two years of discussion on how to revamp Virginia's payday lending industry, which allows customers to borrow up to $500 for a fee of $15 per $100. The industry's critics argue that it preys on borrowers who fall into a cycle of debt and take out multiple loans with effective annual interest rates that can top 700 percent.

Gov. Tim Kaine, who has called for aggressive payday lending reform, said the bill "goes after the important objective of protecting vulnerable people."

"A lot of people are really harmed by the way the industry conducts its practices right now," Kaine said.

Industry representatives opposed the bill and predicted it will drive some payday lenders, particularly smaller cash advance businesses, out of Virginia. Jamie Fulmer, the director of investor relations for Advance America, said the bill would reduce revenues at his company's 150 stores by about 20 percent.

Fulmer agreed with lawmakers that the bill creates the most restrictive regulatory scheme of any state that allows payday lending. But he said the legislation should have been more targeted and not place restrictions on borrowers who routinely pay off loans on time.

"Let's not just paint every borrower with some broad brush," Fulmer said. "We think ultimately that hurts the borrower who uses the product responsibly."

The legislation would give borrowers two pay periods to repay a loan and limit them to one loan at a time. A borrower who takes out five loans in a 180-day period would have to wait at least 45 days to obtain a sixth loan. Borrowers who opt for a 60-day extended payment plan would be locked out from taking out a loan for 90 days.

The legislation also changes the rate structure, allowing lenders to charge a fee of 20 percent of the loan amount, a 36 percent annual interest rate and a $5 verification fee that would be used to fund a computer database. Lenders would use the newly created state database to make sure customers meet eligibility criteria for the short-term loans. Legislators hope to use that database to keep tabs on the industry over coming years.

Kaine said the provisions that limit borrowers to one loan at a time and lock them out of the system after five loans would help keep customers from falling into a debt trap.

Sen. Phillip Puckett, D-Russell County, who sponsored the Senate version of the bill, said the compromise was the result of exhaustive negotiations.

"I don't think the average person realizes how much time and energy has been spent on this," Puckett said. "You've heard us all talk about this not being a perfect bill. I wouldn't say that anyone likes everything about it, including all of us who have worked on. But we think it is a good start."

Some House members made no effort to hide their disdain for the payday lending industry as they debated the bill on the floor.

"We're dealing with a beast here in these payday loans," said Del. Ken Melvin, D-Portsmouth, one of the General Assembly's fiercest critics of payday lenders.

"My first option, which has always been to put them out of business, just won't happen in this state," Melvin said.

A broad coalition of interest groups had joined forces to push for payday lending overhauls, and some groups were disappointed with the version of the bill that passed Thursday -- but for different reasons than the industry. Ben Greenberg, legislative director for the Charlottesville-based Virginia Organizing Project, raised concerns that the lengthy lockout period for borrowers in extended payment plans would prompt lenders to discourage borrowers from choosing those plans.

Kaine stopped short of saying he will sign the bill without amending it, but said he was satisfied with accounts provided by lawmakers who helped craft the compromise.

"The legislators on both sides of this issue have come to me and said, 'We think this is a good compromise that will protect vulnerable people,' " Kaine said. "That goes a long way with me."

mason.adams@roanoke.com (804) 697-1584

mike.sluss@roanoke.com (804) 697-1585