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PHOENIX — An initiative drive to put the payday-loan industry out of business in Arizona may falter because of a split among supporters.

Members of an organization dubbed Stop Payday Predators announced Friday that they no longer are backing the initiative. State Sen. Debbie McCune Davis, D-Phoenix, who is chairing that group, said she believes the money being raised to put that measure on the November ballot would be better spent killing an industry-backed initiative that would make payday-loan stores a permanent presence in Arizona.

That leaves only the Stop Payday Loans committee, headed by Rep. Marian McClure, R-Tucson, to pursue the initiative to abolish the industry. McClure said Friday that she is counting the signatures already collected and will decide in the next two weeks whether to pursue the ballot measure.

Both initiatives require 153,365 signatures by July 3 to qualify for the ballot.

McCune Davis and McClure share the same goal: to eliminate the industry that has legal permission to make short-term loans at annual interest rates topping 400 percent. The question is how best to do it.

Arizona law generally limits interest on loans to 36 percent. But legislators agreed eight years ago to create "deferred presentment transactions."

Under that law, borrowers can obtain up to $500 for up to two weeks for a one-time fee. The borrowers write out a check for the loan plus the fee, which the lender agrees not to cash for the specified period until the person's next paycheck.

But the 2000 law was made temporary to see how the system works. If the law is not changed, payday lending disappears in 2010.

McClure began gathering signatures on petitions earlier this year to permanently revoke their ability to operate in Arizona. In fact, anyone who provided those services after Oct. 31, 2009, could be imprisoned for 18 months.

Wiping out the industry by initiative would have another advantage: The Legislature could not make those loans legal again without first getting voter approval.

The payday lenders decided to fight back with their own initiative, one that would eliminate that 2010 expiration date. Here, too, if this measure were approved by voters, lawmakers would be barred from limiting their operations in the future.

Hoping to sway voters, the lenders, organized under the banner of Arizonans for Financial Reform, agreed to some new restrictions on how they operate.

One would spell out that customers who cannot repay the loan at the end of its term would be given an extension for up to four paydays, or four months if the person is unemployed. The borrower would owe no additional interest if each payment is made on time.

And the effective interest rate also would drop slightly: The fee for a two-week period would be capped at $15 for every $100 borrowed, versus the current $17.65 limit.

McCune Davis said she fears having two measures on the ballot, both purporting to help consumers, would confuse voters. She said the focus has to be on killing the "completely self-serving" measure being pushed by the industry.

"Rather than raise money to put paid circulators on the street to put a second initiative on the ballot, our decision is to simply gather the resources to develop a message in opposition to the industry initiative," she said.

Money will be an issue.

At this point, the largest donation to McCune Davis' committee is $10,000 from Local 99 of the United Food and Commercial Workers Union. By contrast, payday lenders already have kicked in nearly $1.6 million just to get the industry measure on the ballot.

McCune Davis said she believes defeating the industry measure would eventually do what McClure wants to do: stop payday loans when 2010 rolls around. The senator said she doubts there are the votes in the Legislature to repeal that "sunset" date on the right of the industry to operate.

Industry lobbyists have said payday loans, when properly used, fill a need. They said it would be cheaper for someone who has an immediate need, such as new tires, to borrow $100 for two weeks for $17.65 than risk bouncing a check and incurring a $25 fee from the bank.