Furthermore, according to DeYoung’s own research, because the payday-loan industry is extremely competitive, the market tends to drive fees down

DeYOUNG: Borrowing money is like renting money. You get to use it two weeks and then you pay it back. You could rent a car for two weeks, right? You get to use that car. Well, if you calculate the annual percentage rate on that car rental – meaning that if you divide the amount you pay on that car by the value of that automobile – you get similarly high rates. So this isn’t about interest. This is about short-term use of a product that’s been lent to you. This is just arithmetic.

DeYoung also argues that most payday borrowers know exactly what they’re getting into when they sign up; that they’re not unwitting and desperate people who are being preyed upon

DEYOUNG: Studies that have looked at this have found that once you control for the demographics and income levels in these areas and these communities, the racial characteristics no longer drive the location decisions. As you might expect, business people don’t care what color their customers are, as long as their money’s green.

And while payday lenders get trashed by government regulators and activists, payday customers, he says, seem to tell a different story.

The guy who got a $150 ticket for public smoking and had to take out a payday loan?

DEYOUNG: If we take an objective look at the folks who use payday lending, what we find is that most users of the product are very satisfied with the product. Survey results show that almost 90 percent of users of the product say that they’re either somewhat satisfied or very satisfied with the product afterwards.

He says he ultimately paid about $50 in fees for the $200 that he borrowed. It wasn’t cheap but he needed the money, and he was able to pay the loan back quickly. To him, the system works.

MCKAMEY: Everybody that comes in here always comes out with a smile on their face. I don’t never see nobody come out hollering. They take care of everybody that comes in to the T. You be satisfied, I be satisfied, and I see other people be satisfied. I never seen a person walk out with a bad attitude or anything.

ERVIN BANKS: I don’t see nothing wrong with them. I had some back bills I had to pay off. So it didn’t take me too long to pay it back – about three months, something like that. They’re beautiful people.

WINCY COLLINS: I advise everyone installment loans Virginia no checking account, “Do not even mess with those people. They are rip-offs.” I wouldn’t dare go back again. I don’t even like walking across the street past it. That’s just how pissed I was, and so hurt.

AL MICHAELS: My only thing is, if you’re going to take out a loan you should just make sure you can pay it back and you have means to pay it back.

Bob DeYoung makes one particularly counterintuitive argument about the use of payday loans. Rather than “trapping borrowers in a cycle of debt,” as President Obama and other critics put it, DeYoung argues that payday loans may help people avoid a cycle of debt – like the late fees your phone company charges for an unpaid bill; like the overdraft fees or bounced-check fees your bank might charge you.

DeYOUNG: They choose not to overdraft the checking account and take out the payday loan because they’ve done the calculus. That overdrafting on four or five checks at their bank is going to cost them more money than taking out the payday loan.

He points to a key piece of research by Ronald Mann; that’s another co-author on the New York Fed blog post.