All in, there are roughly 20,000 payday shops in the U.S., with total loan volume estimated at around $40 billion a year. But the industry grew as many states relaxed their usury laws – many states, but not all. Payday lending is forbidden in 14 states, including much of the northeast and in Washington, D. And that leaves 27 states where payday lenders can charge in the neighborhood of 400 percent interest – states ranging from California to Texas to Wisconsin to Alabama, which is what drew President Obama there.

OBAMA: Here in Alabama, there are four times as many payday lending stores as there are McDonald’s. Think about that, because there are a lot of McDonald’s.

OBAMA: If you’re making that profit by trapping hard-working Americans into a vicious cycle of debt, you’ve got to find a new business model. You’ve got to find a new way of doing business.

The CFPB doesn’t have the authority to limit interest rates. Congress does. So what the CFPB is asking for is that payday lenders either more thoroughly evaluate a borrower’s financial profile or limit the number of rollovers on a loan, and offer easier repayment terms. Payday lenders say even these regulations might just about put them out of business – and they may be right. The CFPB estimates that the new regulations could reduce the total volume of short-term loans, including payday loans but other types as well, by roughly 60 percent.

FULMER: We have to wait for the final proposal rules to come out. But where they appear to be going is down a path that would simply eliminate a product instead of reforming the industry or better regulating the industry.

If you were to go back to the early 1990s, there were fewer than 500 payday-loan stores

The payday industry, and some political allies, argue the CFPB is trying to deny credit to people who really need it. Now, it probably does not surprise you that the payday industry doesn’t want this kind of government regulation. Nor should it surprise you that a government agency called the Consumer Financial Protection Bureau is trying to regulate an industry like the payday industry.

It may not even surprise you to learn that the Center for Responsible Lending – the non-profit that’s fighting predatory lending – that it was founded by a credit union, the Self-Help Credit Union, which would likely stand to benefit from the elimination of payday loans. And that among the Center’s many funders are banks and other mainstream financial institutions.

As you find when you dig into just about any modern economic scenario, most people have at least one horse in every race, which makes it hard to separate advocacy and reality. So let’s go where Freakonomics Radio often goes when we want to payday loans South Dakota find someone who does not have a horse in the race: to academia. Let’s ask some academic researchers if the payday-loan industry is really as nasty as it seems.

DeYOUNG: Most folks hear the word payday lending and they immediately think of evil lenders who are making poor people even poorer. I wouldn’t agree with that accusation.

DeYOUNG: My field of expertise is commercial banking and lending. So my interest and expertise in payday lending is a natural extension of consumer credit provided by financial institutions.

C. Another nine states allow payday loans but only with more borrower-friendly terms

DeYOUNG: Well, I’m an academic through and through at this point. I spent the 15 years before I came to Kansas as a bank regulator at the Federal Reserve, the FDIC, and the Treasury Department.