Payday Loans: Costly Cash

As the commercial plays out, we hear a woman's soothing voice saying, "Always use payday advances responsibly."

Using a credit card to buy things you can't pay off the next month is bad enough, but to borrow against your next paycheck is the very definition of irresponsibility. It's an incredibly unwise financial move.

Unbelievably, several minority groups have partnered with the CFSA to promote financial literacy. Why would they do this, I wondered, especially when so many payday storefronts are located in economically depressed minority neighborhoods?

Well, it turns out there's money in it for the minority groups.

The CFSA is giving about $2 million to fund financial literacy programs for two groups, said its spokesman, Steven Schlein.

The trade association is partnering with the National Conference of Black Mayors to host summits "to teach young people the importance of building a solid financial future." I certainly hope it's a future that never involves a payday loan. The CFSA also is teaming up with the National Black Caucus of States Institute. As the trade group says in its news release, the partnership will "educate African-American legislators and community leaders on critical issues regarding consumer credit, and provide community volunteers with resources they need to educate consumers in their communities on how to become credit savvy."

Clearly, the savvier one is the payday industry.

What better way to try to fend off regulation than to partner with minority groups supposedly looking out for the very people their opponents say the industry is taking advantage of?

But the payday lenders are right about one thing. They are providing a service the people want. Just last month 15 million people took out payday loans, Gayhardt said.

"I think consumers understand the bargain they get with a payday loan," he said.

But, you know, not every bargain is a good buy.

Research and reporting assistant Charity Brown contributed to this report.