The lobbying war between consumer groups and short-term lenders over the Government's plan to impose a cap on personal loan rates entered a new phase on Friday, when a Melbourne pensioner lodged a complaint against lender Cash Converters in the Victorian Magistrates Court.Consumer Action Law Centre, which has led the push for a national cap on rates, announced yesterday that it is representing the pensioner, Ronald Hayes, who claims he was forced to rely on charity because of the impact of Cash Converters' behaviour.Hayes alleges Cash Converters breached the National Consumer Credit Protection Act and the National Credit Code when it gave him at least 64 short-term loans over a three-year period.Cash Converters' group legal counsel, Michael Cooke, said the company would defend the action. Cooke said: "We discharged our responsible lending obligations in dealing with the borrower. He repaid all his loans; he never complained of hardship, and he never complained of illness."In August, The Minister for Financial Services, Bill Shorten, released draft legislation aimed at regulating the activities of high-cost payday (or short-term) lenders. The reform, an amendment to the National Consumer Credit Protection Act, would introduce limits on how much short-term lenders can charge.  The cap on costs would apply to finance contracts of up to $2000 that run for less than two years.Lenders would be limited to charging an upfront fee of 10 per cent of the total amount borrowed and two per cent each month for the life of the loan. Apart from fees payable in the event of default, the lender could not apply any other charges.The two per cent monthly charge applies to "the first amount of the credit contract, excluding the upfront fee."For larger loans, a credit provider is prohibited from entering into a contract where the annual "cost rate" exceeds 48 per cent.Lenders would not be allowed to refinance small-amount contracts. The aim is to stop debt rolling over and compounding.The lender would also be required to inform consumers of other options, such as Centrelink advances, and no-interest and low-interest loan schemes run by community organisations, and the availability of hardship programs run by credit providers and utilities.Next month, the Parliamentary Joint Committee on Corporations and Financial Services will commence an inquiry into the proposed amendments.The most recent data on payday lending comes from a research project undertaken by Melbourne's RMIT, Queensland University, National Australia Bank and Good Shepherd Youth and Family Service. A report of their research, "Caught Short", was published last month.According to the report, 78 per cent of the borrowers surveyed were receiving Centrelink benefits. "Poverty pervades the lives of most borrowers," it said.The majority of those surveyed (54 per cent) borrowed amounts of less than $300. Only seven per cent had a credit card, and 60 per cent had a poor credit rating.Over half had taken out more than 10 loans since they started borrowing from payday lenders and "many" said they had taken out more than 50 loans.Forty-four per cent said they had "cycled" loans -