On TV this summer, you might have seen this ad with a smiling young woman offering help for all those troublesome bills.
"The problem-solver from Western Sky. Get up to $10,000 without collateral. Enough to pay off your payday advances, once and for all," she says.
There's a beating drum in the commercial, presumably to drive home a point — Western Sky says it's 100 percent Native-American owned and therefore exempt from state laws banning high-cost loans.
But Benjamin Lawsky, superintendent of financial services for New York State, doesn't buy that argument. "These are companies looking to prey on people who in my opinion are some of the most vulnerable people in our society," he says.
New York is one of 15 states that ban high-interest loans. This summer, Lawksy sent cease-and-desist letters to Western Sky and 34 other online lenders. He asked banks to block the companies from getting access to New Yorkers' bank accounts, and the state sued Western Sky for charging interest rates of more than 355 percent. The impact was immediate.
"It's a pretty nice, large, beautiful building, and right now it's empty," Western Sky supervisor Tawny Lawrence said, while standing in the company's deserted call center on the Cheyenne River Indian Reservation in Eagle Butte, S.D.
Western Sky announced in September that it was laying off nearly 100 workers because of what it called "groundless overreach" by government regulators. Lawrence says jobs are scarce here, so people took the news hard.
"We sat down on the floor and then I told them. And Indian people don't cry loud, you know. So there was a lotta, lotta silent tears," he says.
That's one of the ironies in the fight over payday lending. Some of those affected by the crackdown are the same low-wage workers regulators say are preyed upon by lenders. And it's not just Western Sky that stopped lending. Others companies have shut down, too.
"This is just simply in our mind a number of ... bureaucrats who decided that they didn't like the industry and were going to attempt to put us out of business," says Peter Barden, a spokesman for the Online Lenders Alliance.
Online lending, which had been growing rapidly, could decline by some 20 percent, or $4 billion, this year, according to one analysis.
Barden says lots of people get payday loans because they need money and they can't get it anywhere else. "We know what the demand is out there, because we can see online. I mean people go into their search engines and Google 'short term loan,' 'I need a loan,' 'where can I get a loan,' " Barden says.
Consumer advocates say that's the problem. These borrowers are desperate, and what looks like a good deal can easily turn into a cycle of debt. The Pew Charitable Trusts found that a typical borrower ends up paying more than $500 in interest for a $375 loan. Nick Bourke, who's with Pew, says people often have to borrow again and again, just to keep up.
"The lender has this unique legal authority to reach into the borrower's checking account and take payment before the borrower can choose to pay rent or utilities or other expenses," he says.
In fact, it's called a payday loan because you're expected to pay up as soon as you get your paycheck. Pew wants regulators to do something about that — maybe give people more time to pay off their debt. Even lenders say they welcome some federal rules to replace all the differing state laws. They'd like the terms to be clear about what are they allowed, and not allowed, to do.