When Pam Sanson needed a quick $300 to pay the bills, she never expected her decision would cost her more than $900 in interest in just six months.
Such "payday loans" with exorbitant interest rates -- 600 percent in Sanson's case -- are illegal in Georgia, where state officials touted a crackdown on lenders who preyed on the poor. But thousands of such loan stores continue to operate around the state, and the country, especially in poor, minority neighborhoods.
"It's like a virus spreading out there," Georgia Insurance Commissioner John W. Oxendine said. "We've been fighting them, and we're fighting them because that's the right thing. It's very frustrating -- we'll shut one guy down and a couple more will pop up."
Sanson borrowed the money in January 2002 and wrote a check for $375 that wasn't cashed as long as she and her husband paid the $75 interest on the loan every two weeks.
"At the time, we were both working, and I didn't see any reason I wouldn't be able to pay it off the following payday," she said.
However, her husband lost his job and her hours at Wal-Mart were cut because of illness. Eventually, Sanson couldn't afford to pay the $75 interest, much less the $300 principal. Her check was sent in to the bank by USA PayDay. It bounced and USA PayDay threatened to send the police to put her in jail, she said.
"That's when I got scared and started calling around for help," said Sanson, who hasn't heard from USA PayDay since she contacted the insurance commissioner's office.
Despite state and federal laws designed to prevent predatory lending, payday loan stores continue to thrive, with 20,000 to 24,000 locations nationwide that take in $2.4 billion in fees and interest each year, according to a 2001 report from the Consumer Federation of America.
The companies, which offer short-term loans quickly with few questions asked, charge as much as $30 every two weeks per $100 borrowed -- the equivalent of a 720 percent annual interest rate. In Georgia, interest on small loans can not legally exceed 60 percent.
Two companies, USA PayDay and Cash In Advance, were ordered by Oxendine to stop making loans this fall. Both companies appealed the rulings.
States are struggling to regulate payday loan businesses while complying with federal laws and allowing law-abiding banks to continue with their lending, said Jean A. Fox, director of consumer protection for the Consumer Federation of America.
For example, USA PayDay now gets its customers' loans from a bank in Delaware, where lending laws are not as strict. Lawmakers are trying to outlaw "rent-a-bank" agreements, in which payday lending chains team up with tiny national banks to take advantage of a federal law granting banks the right to export high interest rates.
In October, federal banking officials barred ACE Cash Express, the nation's largest payday lender, from using a similar agreement to make high-interest loans in 18 states.
Cash In Advance uses a different arrangement. It sells telephone cards instead of directly lending them cash, Oxendine said.
For example, customers who need $100 would get that amount of cash in exchange for promising to pay $22.50 for a phone card -- which costs the company just $2.50 -- every two weeks for a year.
If customers pay the loan plus 30 percent interest at any time, they can stop buying phone cards. If not, they will pay $585 for the $100 loan and 26 phone cards. Oxendine says the phone cards usually do not work.
USA PayDay owner Richard D. Clay II did not return phone calls seeking comment. Stephen Ivie, an attorney for Cash In Advance, said the company is not in the payday loan business.
"They sell phone cards," Ivie said. "The contract Cash In Advance uses is similar to any contract with AT&T, Sprint, if you're getting a cell phone, or if you get Internet service from somebody."
Sandra Mardenborough of Decatur, Ga., got a payday loan recently from a USA PayDay store tucked among a line of strip malls and fast-food establishments. She said it was the quickest and easiest way to get money.
"I was missing a paycheck, I had a lot of bills, I have a new baby, and being a single mother I have to keep shelter," she said.
Mardenborough said she would pay off the loan when she got her next paycheck and would not fall into a never-ending debt.
Others taking loans from USA PayDay stores around Atlanta would not give their names, but they were all cautious about the dangers of not paying off the debt by their next paychecks.
The average person who uses payday loan services is a young parent making between $25,000 and $50,000 a year, said Penny Pompei, executive director of Community Financial Services Association, a payday industry group.
"If they have a car problem, or need an emergency medical bill, this is an option they should go to," she said. "It is a way to solve an immediate problem."
But Fox says payday loans target the poor and trap people in an endless cycle of debt. There is always a better way to get money than a payday loan, she said.
"You keep paying the finance charges to roll the loan over to the next payday," she said. "Once you get started, you have trouble stopping."
Georgia state Sen. Don Cheeks (R-Augusta), chairman of the Senate Banking Committee, said he would introduce legislation this session that would levy taxes so severe on unlicensed payday loan companies that they would go out of business.
Payday loan companies argue that they should be regulated, but not the same way as other small loan providers, said Jet Toney, a lobbyist for the Georgia Community Financial Services Association. He wants a law that would permit 15 percent short-term interest rates -- about 360 percent annually -- on small loans of between $50 and $500.
"It can help pay medical expenses for a sick child, or it can carry families through for their food until the next paycheck comes in," he said.