The tragedy of payday loans

One of the tragedies of the pandemic is that cash-strapped people are turning to payday loans.  Readers of this blog won't need to be educated about the crippling cost to the borrower, but here's a good summary from the Federal Reserve Bank:

Payday loans are marketed as a convenient, short-term solution when a borrower needs cash in a hurry. Storefront payday loan businesses began to spring up across the country in the 1980s and quickly became commonplace. In 2017, there were 14,348 payday loan storefronts in the United States. By comparison, this was about the same number of Starbucks locations and slightly more than the 14,027 McDonald's locations in that same year. The 1990s brought expansion to the industry when the internet added the convenience of online payday lending...  

Collectively, borrowers spend as much as $9 billion each year on payday loan fees. On average, the fee for a payday loan is $55 for a two-week loan, and the typical $375 loan will incur $520 in fees because of repeat borrowing...  

Historically, payday lending has been regulated by individual state law; each state has its own specific regulations. It gets complicated trying to understand payday lending with so many differences. Seventeen states and the District of Columbia either prohibit payday lending entirely or have set interest rate caps that force lenders out of business because of unprofitability. The remaining 33 states permit payday lending. These states have either exempted payday loans from usury laws or chosen to not regulate the interest rates on the loans...

Lots of details at the link.