OTTAWA — The days of storefront money lenders being allowed to charge 1,000-per-cent interest rates for an advance on your next paycheque may soon be over.

The Conservative government will introduce long-awaited legislation Wednesday intended to regulate the payday-loan industry.

Government and industry sources say the bill will create a special Criminal Code exemption that lets provinces set short-term interest rates.

"Stay tuned,'' Justice Minister Toews said Tuesday after a payday bill was announced on the House of Commons order paper. "We're working very hard on that particular issue.''

The bill comes after years of demands from opposition parties and even from the industry itself.

They say the absence of guidelines has allowed unscrupulous lenders to charge sky-high rates, leaving the entire industry sullied by comparisons to loansharking.

"Thank goodness,'' NDP MP Judy Wasylycia-Leis said of the impending legislation.

"We don't always have a lot of good things to say about the Conservatives, but thank goodness for this one.''

One government official says the bill was simply a recognition that some outlets "are charging pretty horrendous fees.''

The government will modify Section 347 of the Criminal Code.

The law currently defines a criminal interest rate at 60 per cent annually, and sets out five-year maximum prison terms for lending beyond that level.

But that bill was written well before the current payday loan phenomenon, in which people can get a quick cash advance before their next paycheque.

Payday loan operators say they simply couldn't remain in business by charging rates similar to a credit card.

They argue that a one-week loan for $1,000 at those rates would generate only a few dollars _ which is less than the cost of processing the loan, and would leave them well in the hole if they tried to cash a bounced cheque from a customer.

With their legal status still in limbo, some payday operators have levied fees and loan-extensions that pushed interest rates well beyond 1,000 per cent.

Under the proposed changes to Section 347, control for regulating short-term loans would be transferred to provinces.

Manitoba, which has seen a proliferation of payday outlets sprout up in recent years, already has draft legislation ready to go. British Columbia, Alberta, Nova Scotia and New Brunswick have also indicated they will follow suit.

Wasylycia-Leis has been pushing for changes for years.

She blames the lengthy wait, in part, on federal-provincial jurisdictional problems. Ottawa has control over interest rates while the provinces are responsible for consumer protection.

But she also says the issue remained off some political radar screens because of who it affects.

"People who are most vulnerable -- on the low end of the income scale -- are often targeted by payday lenders. And this hasn't been a high enough priority,'' she said.

"Unlike any other area we've left people to the whim of a completely unregulated marketplace .... It takes a political will that has been lacking, and it takes the provinces getting their act together.''