They also hit bank accounts with EFT withdrawal up to 3x per day if the first one didn't clear, which is $40 NSF charge each time. Unfortunately because these lenders signed a piece of paper allowing for automatic withdrawal, the payday loan company then steals all your money the day before you are paid, so your account will be debited -$200 for a $100 loan you missed a payment for, factoring in all the NSF and late charges. Since most people are paid with direct deposit nothing they could do to stop this. Bank will also charge interest on the overdraft.
So on payday you have nothing, and are forced to go back to the payday loan company just to survive but are now paying even higher interest, because you defaulted once. Sounds like they are well regulated where you live but not here they are still loan sharks.
Things were very bad in the UK until recently, and in many ways still are, but the companies have come under a lot of regulatory pressure, and are being... better. I'm afraid that sometimes you have to choose between 2 evils.
People are not dumb, and 1.2 million (3/100th the population) took a payday loan in 2009. You could credit a lower number to individual poor judgment, but these are rational economic operators borrowing small amounts at high interest rates to avoid hunger or larger losses due to cash flow problems.
Of course that sounds worse than it is because the loan is short term.
Still though, I wish there was a more reasonable solution to this problem. I wonder how much of these rates are due to the risk involved in loaning to the sort of people who take these loans and how much of it is "because they can".
My bet is that most of the people that use these services couldn't make a simple interest calculation
I expect that if you don't repay when you agreed, though, you're going to end up paying a lot more.
I think instant pay day loan companies like Wonga have done a lot for the cash flow problem. Personally, I've never used them, but if you have a bill and need to avoid a £50 late penalty, you can get a $100 loan at 1% interest a day, which is a brilliant value proposition if payday is a week away. I've seen a lot of criticism of these companies, but I think it's from people who don't understand the problem.