A new study shows people taking out payday or auto title loans end up paying huge amounts of interest and fees while stretching out their debt for many months.

The study was done by the Safe Small-Dollar Loans Research Project of the Pew Charitable Trusts.

Nick Bourke is director of that project and said Texas is one of the many problem states.

"A typical payday loan in Texas has an annual percentage rate of 533 percent,” Bourke said. “It's taking up 38 percent of the typical Texan's paycheck. The average borrower ends up in debt for five months, pays $520 in fees, and in the end, they still owe that lump sum that they borrowed in the first place."

The study also found that 12 million Americans take out payday loans each year, spending about $7.4 billion dollars.

The average loan is $375.

Bourke said 8 percent of Texans are using payday loans every year and many dig themselves into a deeper financial hole than before they got the loan.

"The loans fail to work as advertised and they're overwhelmingly unaffordable,” Bourke said. “Payday loan borrowers feel taken advantage of."

While San Antonio and some other cities have passed ordinances to protect borrowers who use payday and auto title loan companies, other cities have not.

Bourke said even local ordinances can help rein in the abuses.

“These types of regulations can have an effect,” Bourke said. “When a payday loan store is in their community, on their way to work, on their way home, it raises the chance they're going to use that payday loan.”

State Representative Mike Villarreal, D-Dist. 123, sponsored a bill in the last Texas legislative session to rein in the abuses of the payday lending industry.

It failed.

He said the loan industry won -- but only for now.

"My committee: I was the only vote," Villarreal said.

He said his proposed legislation had two simple goals.

"Don't give somebody a loan unless you look at how much they earn,” Villarreal said. “Number two, we wanted to limit how many times these loans could be flipped. With each flip of the loan the fees go up and so in the end the consumer is in a worse and worse and worse position."

He is now focused on making sure cities know how to pass their own ordinances -- like San Antonio’s -- to restrict payday and auto title loan abuses.

He said if all cities do that, the loan businesses will not be able to relocate to a border city to avoid regulation.

“We've seen this play out with fireworks,” Villarreal said. “If we get the ball rolling at the local level, it will be both an effective way to protect consumers locally, but it will also be an organizing tool.”

He said borrowers should simply avoid payday and auto title loan places when seeking funds.

“Go to a family member and ask for help,” Villarreal said. “Have a garage sale. Sell stuff.”

He has seen Pew’s research and agrees payday loans for many borrowers are a trap.