payday loans

Updated at 4:50 p.m. E.T.

For millions of cash-strapped consumers, short-term loans offer the means to cover purchases or pressing needs. But these deals, typically called payday loans, also pack triple-digit interest rates — and critics say that borrowers often end up trapped in a cycle of high-cost debt as a result.

Efforts to get payday loan reform in Louisiana failed in the state legislature during the recently concluded session. The advocacy group Together Louisiana has since sent a letter to the Consumer Financial Protection Bureau asking for safeguards to be enacted nationally.

Together Louisiana wants the bureau to implement new rules that would prohibit issuing payday loans to borrowers already in debt or unable to afford repayment, and increase the reporting requirements on payday loan transactions.

  You live on a limited income, paycheck to paycheck. Now your next paycheck is in jeopardy, because your car won’t start. What to do?

There’s that payday lending store around the corner, so you go take out a loan and buy a new battery for your car. You give the lender a post-dated check for the amount of the loan, plus interest and fees. The lender cashes your check after you get paid. Done deal, right?

Not always, according to David Gray with the Louisiana Budget Project.

As part of its Changing Lives of Women series, Morning Edition is exploring women and their relationship with money: saving, purchasing and investing for themselves and their families.

Cuban-American Barb Mayo describes a tanda like this: "It's like a no-interest loan with your friends." Mayo had never heard of tandas growing up, and it wasn't until she started working in sales for a cable company in Southern California that she was introduced to the concept.

Sue Lincoln

Penny Fisher says she got caught in the payday loan trap.

“I borrowed $300 back in ’95, and ended up paying $4,983.30 back.”

Thelma Fleming had two jobs, and lost one. She went to a payday lender to borrow money to pay her bills.

“And I borrowed $300. That really changed my life because I lost my car. My checking account was closed.”

State Senator Ben Nevers of Bogalusa says enough is enough.

A payday loan is a costly form of credit operating on the fringes of the economy. That's why the target of a new crackdown by federal regulators may surprise you: Instead of a forlorn-looking storefront with a garish neon sign, it's your familiar neighborhood bank.

A small but growing number of banks, including some major players, have been offering the equivalent of payday loans, calling them "deposit advances."

That is, at least, until bank regulators stepped in Nov. 21 and put new restrictions on the loans.

Payday lenders made about $49 billion in high-interest loans last year. More than a third of those loans were made online. I wondered what happens when you apply for such a loan, so I decided to find out.

In the course of reporting a story earlier this year, I logged on to a site called and filled out an application.

I asked for $500 and, to be safe, I made up an address, a name (Mary) and a Social Security number. The site asked for more sensitive stuff — a bank account number and a routing number — and I made that up, too.