Payday loans: State governments try to run payday lenders out of town

Payday loans can wreak havoc on a person's financial life. These loans carry sky-high APRs and the penalties for late or missed payments can be extreme. Many consumers, who turned to payday lenders in a time of need, later find themselves worse off than when they started. In this series, WalletPop takes a look at the payday lending industry and some of its players: those who dole out the loans, the regulators who try to rein them in and the people who desperately take out these loans hoping for a some relief. This is the third installment of our payday lending series. You can read the first part of this series here

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Before payday lenders came onto the scene, pawn shops and mom-and-pop check-cashing services made a tidy little profit off of those who were desperately seeking access to cash. Noticing the high profits and the minimal amount of regulation surrounding these loans, larger, deep-pocketed companies began getting in on the act, gaining a significant amount of momentum in the 1990s. Making matters worse, these lenders were successful in convincing state legislatures to exempt their businesses from usury laws, which set a limit on interest rates. That meant lenders could charge rates that climbed well into the triple-digit percentages.