One solution to predatory payday lending

Payday  LoansPayday Loans by Steve Rhodes, on Flickr

They go by a variety of names, but payday loan shops usually have a common theme: Money is available for you, and it’s available now.

Of course, it’s not as simple as that. Sure, you get your $500 or $1,000 to make that rent payment or emergency medical bill, but the extremely high fees and interest rates can put you in a deeper hole. That makes for a vicious cycle, as these operations target mostly low-income people.

The solution? Walmart, says Slate’s Matthew Yglesias.

The solution to this problem, I think, would be for banking services to be performed by a firm that already has low-income clients and would have an interest in increasing its level of engagement with them even if the payday lending operation wasn’t profitable per se. In a word, you need Walmart.

Banks don’t touch this market because it’s not profitable enough. So will Walmart step in? It has tried and failed numerous times to get a U.S. banking license, so it’s certainly clear the mega-chain is interested in financial services.

The fear that Walmart would become too powerful is worth considering. But so is the reality that too many of us face: sometimes, you really need that $500.

For more on payday loans, check out this excellent Marketplace series.