With the backing of the Oregon Catholic Conference and other advocates for the poor, the Portland City Council last week unanimously passed a first-step regulation of the payday lending industry.

The church and social service groups hope for even stiffer regulations when the next Oregon Legislature convenes.

The ubiquitous fast cash shops have in some cases preyed upon borrowers, charging 'usurious' rates above 500 percent, said testimony submitted to the council by the conference, public policy arm of the state's Catholic bishops.

'This is an issue that has consumer protection at its heart,' says conference director Bob Castagna.

The new ordinance stops lenders from renewing a payday loan unless the borrower has paid at least a quarter of the loan's principal plus interest on the remaining balance. That will stop the soaring rollover rates that are now the norm.

The new ordinance also makes it easier to cancel a loan and to construct a payment plan.

Payday lenders not following the new rules face fines of up to $1,500 per violation.

City Commissioner Dan Saltzman has led the reform, saying it is necessary to save working families from a 'bottomless pit' of debt.

'Unfortunately, payday lending is virtually unregulated by state law,' Saltzman says. 'We must level the playing-field between the payday lenders and the borrowers.'

A statement from Mayor Tom Potter's office said the new rules 'will protect many working families.'

The city council acted where the Oregon Legislature would not. A bill calling for similar provisions failed to move in the last session in Salem.

In written testimony, Castagna said the city's action would 'highlight' the further need for a cap on interest rates and fees, a step only the Legislature can take.

Portland City Commissioner Randy Leonard has several times called on his former colleagues in the statehouse to take on the issue of rates.

Oregon is among a shrinking number of states that has no cap on payday loan interest rates.