the country. all right so more on all the stories that we have been covering on our website al jazeera.com is the address, all the news there of course, plenty of features and comment and analysis, you can fine that too, al jazeera.com. most vulnerable members in a dangerous cycle of debt. as this show has reported, these loans are pushed by companies for low to moderate americans with rates that would make a loan shark blush.

they deal with tens of thousands of story fronts and online. regulator $are waking up to the threat posed by them that have slipped the knot of regulation new zealand some states. tonight you're going to hear why the payday loan industry says a federal effort to stamp out consumer fraud called open operation choke point. it is important to acknowledge that the idea of someone borrowing a relatively small amount of money, $300 until they get paid in two weeks sounds reasonable. most people can't pay the loans back on time and that is the reason that four out of five payday loans are renewed within two weeks. borrowers taking out a median of 10 loans a year. it means that pay day loans put

people into an endless cycle of fees more than the amount borrowed. the good news is that the consumer protection bureau will soon propose new rules that may force these lepders to verify a lend-- lenders to verify the borrower's income, to take into account their obligations, rent, mortgage payments, transportation and child care. some advocates think the rules will go far enough to protect borrowers from falling into this debt trap. the industry meanwhile sees the potential rults as another-- rules as another threat to its existence. whatever happens it is important to under the damage that pay day loans have done to some people's lives. >> it was a horrible decision that she now regrets.

this is a 43-year-old mother of five who lives in billings, montana. she found herself in a financial bin a few years ago >> at the time i was divorced, struggling financially. i came across loan point u.s. a each year 12 million people nationwide take out loans from pay day lenders. many of which operate through the internet. one company, money mutual, has a flashy ad featuring williams. >> go to this company, they will give you up to $1,000 in as low as 24 hours. >> reporter: she clicked a few buttons on the website and within hours $600 was electronically transferred into her checking account. what she didn't fully understand were the terms of the loan >> what i discovered is loan

point was automatically deducting kind of interest fees of $180 every two weeks out of my bank account that $180 interest payment actually meant her internet payday loan had a whooping annual percentage rate of 780%. >> the worst part was not being able to provide for your kids. if they wanted to play on a soccer team, i had to tell them they couldn't because i was stuck in this loan. it was hard. >> by the time she came to me she had paid in excess of $180 # interest on a $600 loan-- $1800 an attorney was contacted. >> she sent me the papers which

i looked through. it was on its face shocking because montana has usury laws that cap lending at 36% apr when he went on the loan point website, he confirmed that the pay day loan company was charging considerably more than what was legally allowed in montana >> i got onto the company's website and it brought up for residents, they charge between 700 to 900% apr her story isn't unique. one third of all pay day loans are from internet lenders who charge an annual percentage rate on average of 652%. >> the whole industry, in my opinion, is insidious. it is impossible to hold these companies accountable loan point u.s. a eventually settled the class action lawsuit

and he was able to get them to pay $233,000 in financial relief to hundreds of residents, including this lady who had borrowed money from the company. but montana isn't loan when it comes to high interest pay day loans. 12 states in colombia have banned them or have strict laws that make them unprofitable >> about 70% of the lenders working on line do not have a licence in all of the states where they lend and a lot of problems have resulted from lenders who are operating outside the bounds of state law this is the director for the small loans project, a nonprofit organization based in washington. he has been studying the harmful effect of pay day loan >> 30% of all borrowers have experienced some kind of unauthorized or fraudulent withdrawal from their checking account

in 2012 the department of justice created a focused effort to tack emthe problem of-- tackle the problem of electronic consumer fraud in the brarng r banking system. it is called operation choke point and it had a massive industry. they're gaining exactlies to the electronic payment system and-- access to the payment system and taking out money. in every one of the cases that have been announced so far under operation choke point, internet pay day lenders have played a big role in creating a vulnerability that fraudsters are using to defraud consumer since 2012 operation choke point has enabled prosecutors to identify several small regional banks that allowed fraud sisters-- fraudsters, mainly pay day learneders, to steal tens of millions of dollars out of the

bank account of more than a million different customers. it wasn't along before choke point had a chilling effect on the entire pay day loan industry. according to an industry trau p trade association sints 2013-- since 2013 more than 780 bankss, including bank of america, capital 1 and jp morgan chase, have severed their ties with all pay day lenders because of choke point. suddenly, the pay day loan industry found itself threatened and access to the banking system jeopardized the >> the campaign is against the industry as a whole. it is unconstitutional and violates due process rights of the law-abiding good and ethical members of the industry charles cooper represents the community financial services association, the pay day loan industry's trade association.

that organization is suing the fdic, the federal reserve, and the office of the controller of the currency, over their part in operation choke point. >> we're challenging what is an enmass assault, really, on the pay day lending industry itself in an effort to destroy it carl frish who runs allied progress based in washington, says the pay day loan industry fought back against choke point by using biggest weapons at its december possessal, money and access to politicians >> they paid congress thousands of dollars to hinder the government's ability to hold them accountable allied progress says in this report that money from the pay day loan industry almost $650,000 was donated to 12 members of the house financial

services committee between 2011 and 2015. the report suggests that the money was given to the congress men in exchange for sponsoring legislation to force the department of justice to shut up operation choke point down. >> congress man from missouri started taking in thousands of dollars from pay day lenders. he sponsored legislation that would end operation choke point. these things were very closely timed and it brought in serious questions that bill was hr 4896, end operatings choke point act of 2014. frish says luke mier took lots of money from pay day lenders. despite repeated requests from al jazeera america luke myer declined to appear on camera or comment on his dealings with the pay day loan industry. the allied progress report

points to 11 other current or former members of the committee who individually took between $26,500 and $100,000 in contributions from the pay day period. >> we talk a lot in american politics about eye-popping figures with campaign finance when we're talking about presidential elections zak carter is the reporter at the huffington post. >> what's remarkable in operation choke point is that for a few thousand dollars here or $10,000 there, you can actually get a bill moved in congress and take up week's of congress time accordingly to frish several senators have received money, including ted cruz, who has received 3500 since 2011 and marco rubio who has received almost $35,000 since 2010. >> marco rubio has filed

legislation to end operation choke point for what he would have us believe is its impact on gun sales that focus on guns shows how the battle over operation choke point evolved beyond the fight over the pay day loan industry. republicans charged that the obama administration was using choke point to attack gun dealers' access to the banking system >> i think operation check point is an abuse of power >> note notice in november ted cruz raised operation choke point again at a hearing. he was talking about the obama administration's effort to legally curtail citizen's second amendment rights on gun dealers >> it was to cut off the lines of credit, cut off the banking resources, financial resources to lawful small businesses, engaged in the exercise of constitutional rights and selling lawful firearms

>> senator, that is not what operation choke point was intended to do. it was developed by career lawyers to focus solely and squarely on fraud in the payment system >> did you apologised to any american citizen, small business owner for violating their constitutional right to keep and bear arms? >> senator, what we did-- >> most politicians don't want to defend the pay day loan industry. it is an industry that has a bad representation among consumers in general, but what has happened is we have a situation where one small industry has been able to get an entire committee of congress, but two presidential candidates to talk about their pet issues as if they're serious matters facing the general public. a single industry with lobbying and a few thousand dollars in contributions has been able to change the dialogue on capitol

hill charles cooper says operation choke point unfairly targets the pay day loan industry >> this industry is addressing great societal need. there is a group of individuals and a pay day loan is often the only thing standing between them and their electricity but back in billings this lady has advice for her own daughters who might some day think about taking out a pay day loan >> i will them to stay clear away from them one quick note. we reached out to several banks the pay day loan industry says have severed ties with lenders because of operation choke point. jp morgan chase, the biggest bank by assets, told us operation choke point had nothing to do with its decision lenders. there are critics who say pay day loans are not a problem,

they're a solution to a problem. coming up.

one in six american at all times are thought to be living with student debt and 90% of the debt is owned by the u.s. government.

right now if you want to refinance your federal student loans you have to try your luck with a private lender but the terms can be strict. many applicants get rejected. our correspondent has the story. >> reporter: this man shares a tiny studio with his fiancee in new york city. he sticks to a tight budget to keep up with his student loan payments >> my student loan is more than my total, $2,000 a month. >> reporter: he is one of 40 million americans paying off student loans. the u.s. government profits handsomely from those loans. it charges all borrowers the same interest rate. federal data shows it will earn 66 billion dollars in loans issued between 2007 and 2012. the private sector wants a piece of that growing money pie.

unlike mortgages or auto loans, student debt is not backed by an asset. so if, for example, you default on your mortgage. a lender can foreclose. if you stop paying your auto loan a bank can repossess. if you failed to meet your student debt obligations, your knowledge and skims cannot be taken away. educational loans are a riskier business which is why the government owns about 90% of student debt. this c oechlt of common bond, the company started three years ago. it raised 10 million dollars in investors anxious to meet student debt refinancing. the secret to success is screening for applicants. >> we look at any major settlements or payments outstanding over 60 to 90 days. we will look at bankruptcys, income, employment. these are things the federal government just doesn't. >> reporter: because the company

looks at so many factors, this man managed to get a lower rate. the rate you were paying before was how much more? >> it was 2% points more. significantly more. >> reporter: common bond spent to generate up to 15 million dollars in profit this year >> what we decided to do was focus on a population of people whose earnings potential is high and employment prospects are high as well. >> reporter: common bond also goes one step further. it aggressively monitors its client's payments. if has also created a community of sorts for its borrowers and hosts social network events foreign them around the country. do you think that you deserve to be treated differently pause you have been so financially astute? >> i'm not sure if i deserve to be treated differently, but that's how this works >> reporter: in effect, growing a pool of graduates, investors are confident will give them steady returns

that's our show for today. i'm ali velshi. thank you for joining us. the news continues here on al jazeera america. trying to prevent so many. acts of defiance, north korea accused of launching another large missile. anti-government protesters return