AUSTIN - Two state representatives told a House panel Tuesday that the payday loan industry is unregulated and their skyrocketing interest rates are hurting many Texas borrowers, especially people who live paycheck to paycheck.

But industry representatives and others who spoke against bills that Reps. Marisa Marquez, D-El Paso, and Carol Kent, D-Dallas, authored countered by saying that borrowers are not only happy with such loans but payday lenders provide a service that banks and other financial institutions do not offer.

The afternoon-long hearing that the Subcommittee on Credit Service Organizations of the House Committee on Pensions, Investments and Financial Services held Tuesday is the latest round in the battle some state legislators are waging against what they call predatory lending.

In the Senate, Democrats Eliot Shapleigh of El Paso, Wendy Davis of Fort Worth and Rodney Ellis of Houston have also filed bills aimed at protecting Texas consumers from the industry.

The rapid growth of the industry has raised some concerns because payday lending, once believed to be an industry that hurt mainly communities along or near the border with Mexico or inner cities, is now thriving in many other areas of the state, including some West Texas counties, according to a study that Shapleigh and his staff conducted.

"I do not want to put the industry out of business," Marquez told the panel after she laid out her House Bill 3744. "I just want to protect consumers."

Marquez, a freshman lawmaker, said she gets lots of calls from constituents and other El Paso residents who feel trapped in the short-term loans that often have annual interest rates of 300 percent or 400 percent in $200 to $500 loans.

And Kent, also a freshman lawmaker, said her House Bill 3302 would protect consumers from check-cashing business that charges high fees for their services.

"We need to make sure that bad actors don't take advantage of people," she said.

Kent said in an interview after the hearing that she filed another bill similar to the one Marquez filed and the two bills have merged to make the proposed legislation stronger.

But industry representatives such as Scott Sheehan told the House subcommittee that critics of the payday lending industry are intent on getting rid of it not only with the proposed legislation but with a negative portrayal.

"The opponents of this industry are intelligent and well-intentioned people," Sheehan said. "But they have an agenda and that is to put this industry out of business."

In addition, contrary to what the lawmakers and other critics say, the industry is already regulated and what the proposed legislation would do is basically put some price controls and the cost would ultimately be passed to the very same consumers the legislation intends to protect, Sheehan and others said.

What critics of the industry fail to mention is that the typical borrower earns about $40,000 and to qualify for a loan, he or she must not only have a bank account but provide proof of employment, industry representatives said.

Rep. Dan Flynn, R-Canton, who chairs the three-member panel, said before the hearing this is an old issue that is getting more attention than usual this session, mainly because of the economic crisis the United States and most of the world are facing.

And though the panel would decide on the merits of the legislation before it takes a vote on whether to send it to the House floor or kill it, there is no question that both sides are passionate about the issue, said Flynn who was a banker for 40 years before being elected to the Texas House in 2002.

Nonetheless, "I think what's been missing in the whole discussion is that no one is going to make those folks a loan," Flynn said. "They are too small. Financial institutions don't want to make them. It is too costly for them and that means that when someone needs to make a utility payment they don't have anywhere else to go."