By Marc Fisher
Sunday, January 20, 2008; C01

S ome bills simply must be paid. So when the rent and the car payment come due but Tasnuva Ahmed's next paycheck is a week away and the wallet is empty, she visits her local payday lenders.

Zips up to the Check 'N Go on King Street in Alexandria, hurries inside and emerges 14 minutes later with a few hundred dollars, an advance on her next paycheck. Cost: $15 per $100 borrowed. Ouch.

Plus the interest she owes on loans from five other payday lending shops around town. Plus the interest on the last round of loans that she has rolled over because all her interest payments prevent her from paying off the principal on her loans. Mega-ouch.

"I owe $450 every two weeks," says Ahmed, a 27-year-old manager at a service company. "Sometimes this is your only option. I respect the fact that they're there when you need them. You have bills, and you have to pay them. But I have never recommended this to anyone. You can't catch up. I started with $100, and now I'm in so deep, this is my second-biggest expense. It's almost close to rent."

Virginia legislators are deep into their second year of debate over whether to tighten the rules governing the state's 790 payday loan shops -- or to squeeze them so hard they close up entirely. The District and three states have driven out the shops either by banning them or by capping their interest rate at 36 percent, as compared with the 391 percent they now charge. Maryland doesn't allow payday loans at all.

This is not as easy an issue as it might appear. Yes, the interest rates look exorbitant. But people who have lousy credit and cannot turn to banks -- many who have jobs and own homes but run short between paychecks -- need a source of money. They find themselves at the counter at Advance America, ACE Cash Express or Cash & Go, where they can get a two-week loan of up to $500.

About 430,000 Virginians borrowed from a payday shop last year, and nearly three-quarters of them took out more than a loan every month.

"These people know what they're doing," says Zainab Charley, the counter clerk at an Advance America on Leesburg Pike. "They're all adults. They know their own financial problems. If you want it, we can give it to you."

The way the industry sees it, they provide a service. You want it, pay for it. "I never say this is the right product for everybody in every situation," says Jamie Fulmer, spokesman for Advance America, which has opened 142 shops in Virginia since the state legalized payday lending in 2002. "But people don't want the government making that choice for them."

The industry and its supporters in Richmond -- payday lenders contributed $486,000 to legislators last year -- propose to save their business by limiting borrowers to two or three loans at a time and prohibiting customers from taking out a new loan until at least 24 hours after they've paid off their last one.

The industry argues that it is being singled out for criticism even though its companies' profit margins are about half that of big banks.

People who need quick cash face a variety of pricey options, industry advocates say, arguing that their 391 percent interest rate compares favorably with the cost of bank overdrafts, credit card late fees or bounced-check fees.

A staff report from the Federal Reserve Bank in New York last fall looked at the impact of shutting down payday lenders in Georgia and North Carolina and concluded that bounced checks, personal bankruptcies and complaints about debt collectors jumped significantly when consumers no longer had the payday loan option.

That's compelling evidence that some people cannot find good alternatives to payday loans, but options do exist, including credit unions and churches that are creating loan pools. I'm willing to accept the payday industry's argument that they cannot make a profit by charging much less than they do. But there's no natural right to profit off the pain of people in trouble.

And none of the industry's arguments hold a candle to the pain in the stories of every single borrower I talked to outside four shops in Alexandria -- the focus of the industry in Northern Virginia, with 16 locations -- and one in Fairfax. (I ran into quite a few D.C. residents who were borrowing in Virginia to pay off loans in the District, where payday companies stopped lending at the turn of the new year.)

"Banks won't talk to me because of my credit rating," says Rochelle, a federal worker who asked not to be named in full because she doesn't want her family to know how deeply she's fallen into debt. "So I need this, but I really hate that I have this option. I've been doing this for three years, and it's all negative. It becomes a cycle, and you just keep rolling."

After two years of regular visits to the lenders, Ahmed last week visited a credit counselor, who is helping to wean her from her $2,000 in payday debt. "Coming here is so easy," she says. "But let me tell you, this will just crush you. Find a friend, a relative, anything, but don't do this to yourself."

Please join me for the premiere of Raw Fisher Radio, a weekly face-off on the big stories in our region, on washingtonpost.com Tuesday at noon.

E-mail:marcfisher@washpost.com