"This used to be called loan sharking"

JPMorgan, Banks Back Lenders Luring Poor With 780 Percent Rates

Money quote (pardon the expression):

Nine out of 10 payday loans are made to repeat borrowers with more than five payday loans per year, according to the Center for Responsible Lending, a group in Durham, North Carolina, that assists consumers in financial difficulty.

The average borrower spends $600 in fees annually on a $300 loan, says a 2004 report in the Yale Journal on Regulation, a law journal published by Yale University in New Haven, Connecticut.

Most payday lenders earn gross profit margins of 30 percent to 45 percent, the report says.

"That's the dirty little secret,'' says Georgia Insurance and Safety Fire Commissioner John Oxendine, whose office has investigated payday lenders. "Payday lending is structured so you just pay the interest every two weeks. They never want you to pay back the principal.''

And they're backed by some of the biggest names in the banking business.