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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

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And I'm Audie Cornish. The world of Payday lending has shifted online and now regulators are cracking down. These lenders often charge borrowers exorbitant fees for quick cash and after some tough new steps from government overseers, lenders are now feeling the squeeze. Some have even closed up shop as Pam Fessler of NPR's Planet Money team reports.

PAM FESSLER, BYLINE: On TV this summer, you might have seen this ad, a smiling young woman offering help for all those troublesome bills.

UNIDENTIFIED WOMAN: The problem solver from Western Sky. Get up to $10,000 without collateral. Enough to pay off your payday advances, once and for all.

FESSLER: The a beat drum presumably there to drive home a point. Western Sky says it's 100 percent Native American owned and therefore exempt from state laws that ban high-cost loans. But this man doesn't buy that argument one bit.

BENJAMIN LAWSKY: These are companies looking to prey on people who, you know, in my opinion are some of the most vulnerable people in our society.

FESSLER: That's Benjamin Lawsky, industry nemesis, and he's also superintendent of financial services for New York, one of 15 states that ban the high-interest loans. This summer, Lawsky 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.

TAWNY LAWRENCE: It looks empty. And it's a pretty nice, large, beautiful building, and right now it's empty.

FESSLER: Tawny Lawrence is a Western Sky supervisor. She's standing in the company's deserted call center on the Cheyenne River Indian Reservation in Eagle Butte, South Dakota. Western Sky announced in September that it was laying off close to 100 workers because of what it called groundless overreach by government regulators. Lawrence says jobs are scarce here, so people took the news hard.

LAWRENCE: We sat down on the floor because we have really nice carpet in here. So we sat down on the floor and then I told them. And Indian people don't cry loud, you know. So there was a lot of, lot of silent tears.

FESSLER: 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 that regulators say are preyed upon by lenders. Some in the industry think that regulators, which include federal agencies which have also weighed in, have gone too far. Peter Barden is a spokesman for the Online Lenders Alliance.

PETER BARDEN: This is just simply, in our mind, a number of federal bureaucrats who decided that they didn't like the industry and were going to attempt to put us out of business.

FESSLER: And indeed, analysts say online lending, which had been growing rapidly, could be down about 20 percent, or $4 billion, this year alone. Barden says that's too bad because millions of Americans can't get cash anywhere else.

BARDEN: 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.

FESSLER: 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.

NICK BOURKE: 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.

FESSLER: 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. They'd like the terms to be clear: what are they allowed, and not allowed, to do. Pam Fessler, NPR News.

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