Where I live (Arizona) there is literally a payday loan store of some type every mile down the road. Every time I drive by, the parking lot has cars in it, and there are people inside the store. Most people have heard about what a rip-off these places can be, but this article really shows how these places prey on the less fortunate.

Some interesting points in the article…

To pay back a $325 loan, the average payday-loan borrower pays a total of $793. The average annual interest rate on such loans runs about 400%, according to the study.

About 90% of payday loans go to borrowers who engage in five or more such transactions a year, and 62% of the loans go to borrowers with 12 or more transactions a year, according to the report, which was based on 2005 data from state regulators, lenders’ public filings and industry analysts.

“A study that the industry backed . . . indicates that only 6% of payday-loan customers say they have no other alternative for getting credit,” said Jean Ann Fox, the director of consumer protection for the Consumer Federation of America.

Payday loans “have to be repaid all at one time,” she said. “These are balloon-payment loans. Families who are already having trouble making ends meet are unlikely to be able to repay the loan in full.”