Consumer and community organizations have waged a lengthy and intense campaign to warn the public about the high cost of payday loans and the dangers of being entrapped in spiraling unaffordable debt.

Despite these efforts the pay day lenders and their profits are multiplying. The yellow pages in telephone directories are filled with advertisements for "easy and quick" pay day loans. The Internet is becoming a favorite venue for these lenders to peddle their credit products. The landscape in low and moderate income neighborhoods is dotted with "check cashing" stores which specialize in these quick cash schemes.

A spokesman for the Consumer Financial Services Association which represents payday lenders boasts that "our business has been growing and growing and growing." The numbers support the claim. The association's members have 22,000 locations up from 12,000 in 2000. Last year, the association's members made $40 billion of loans, generating $6 billion of revenue.

The payoff may be big, but the scheme is simple. The borrower provides the lender with a post-dated check and receives an amount less than the face value of the check-the deduction representing the lender's fee. The check is then held until the borrower's next payday-a week or two or a month later. But the scheme becomes even more lucrative for the lender when the borrower asks for an extension, a rollover until a later pay day. The charges mount with successive rollovers, ultimately leaving borrowers under a mountain of debt carrying what amounts to an effective interest rate of 390 percent on average. And consumer groups cite numerous transactions with rates as high as 600 percent based on an annual percentage rate (APR).

Why would anyone become involved in such one-sided transactions? Most of them are born of desperation: A sick child needing costly prescriptions in a family without medical insurance; major repairs for an automobile needed by a worker who must travel to a construction job in the distant suburbs; and a family attempting to forestall aggressive collection efforts and legal action on overdue bills or to pay back rent to avoid eviction.

We have a far flung "recently modernized" financial system much ballyhooed as the envy of the world-subsidized and coddled by a friendly regulatory system and rendered essentially fail-safe by taxpayer-backed insurance. Why can't borrowers turn to the insured government-chartered banks instead of to payday loan operators operating on the fringe?

The hard truth is that banks with few exceptions don't make small consumer loans-of the $200 or $500 or even the $1,000 and $2,000 variety. That always has been the case and today banks substitute fee-ridden credit cards for small consumer loans. Most of the payday borrowers lack the credit standing to obtain credit cards and if they did they would face the tricky world of annual membership fees, the late charges when the monthly payment misses the post date by a few hours and ultimately the "over the limit" fees when charges exceed some previously ordained limit imposed by the card issuer. And interest charges on credit cards can and are arbitrarily raised and many of these hikes look like first cousins to the rate schedules for the payday merchants.

Banks are quite happy to leave the consumer loans for the low and moderate income population-the working poor-to payday merchants. Of course, many "respectable" banks quietly furnish the capital for the payday operations, getting a cut of the lucrative payday business without getting their hands dirty or taking any risks.

The growing role of payday lending and its big brother, predatory lending, in the lives of low and moderate income and minority citizens is discouraging, but there are solutions-solutions already on the books that can reign in the payday lenders. The answer lies in an underused provision of the National Credit Union Act which authorizes the formation of Community Development Credit Unions in low-income neighborhoods.

A few of the Community Development Credit Unions (CDCUs) were formed 50 years ago as a weapon in combating loan discrimination in inner city neighborhoods. The effort got a second wind when big banks launched a massive closing of branches in low income and minority neighborhoods.

But, the biggest boost for the low-income credit unions came in 1994 when the new Chairman of the National Credit Unions Administration-former New Hampshire Congressman Norm D'Amours-announced the formation of the "Office of Community Development Credit Unions." D'Amours followed up this initiative in speeches to credit union audiences urging their support for low-income credit unions.

Under the leadership of Cliff Rosenthal, the National Federation of Community Development Credit Unions was formed and today there are about 400-member credit unions operating under low-income charters around the nation. The charters allow low-income credit unions to obtain technical assistance from the National Credit Union Administration (NCUA) as well as low-interest loans (one to three percent) from a revolving fund at NCUA and to accept a limited amount of deposits from non members.

Credit Unions are cooperatives, consumer owned, nonprofit institutions with no outside stockholders. There is no incentive to exploit their "customers" who are the member-owners and there are no outside investors to demand a share of "profits." What is needed to end the plague of predatory lending and payday scams is a crash effort on the part of the National Credit Union Administration to establish a network of low income citizen-owned development credit unions throughout the inner cities. Rest assured, the pay day lenders won't try to compete on the credit union terms. But, this can't be a passive effort on the part of NCUA. The agency needs to beef up its staff by hiring organizers who will go into communities, set up meetings to explain how the credit cooperatives can be established and help move the applications forward.

There is precedent for this kind of outreach. That's how electricity was brought to rural areas for the first time in the 1930s after investor-owned power companies had stiffed rural communities for decades. Staff members of the new Rural Electrification Administration (REA) drove their Model T's down dirt roads, posted signs on school house doors announcing meetings and then worked into the night to help organize cooperatives and to process applications for two percent loans to finance the systems. The effort revolutionized farm and rural life. Credit cooperatives can do same for low and moderate income families, particularly in our inner cities. It's a sure way to end the destructive reign of the payday lenders.

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