By Robert Faturechi in today’s LA Times:

Critics say the high fees that come with the loans send the jobless into a cycle of debt.  The industry sees it as a service for people in need.

The payday loan industry has found a new and lucrative source of business: the unemployed.

Payday lenders, which typically provide workers with cash advances on their paychecks, are offering the same service to those covered by unemployment insurance.

No job? No problem. A typical unemployed Californian receiving $300 a week in benefits can walk into one of hundreds of storefront operations statewide and walk out with $255 well before that government check arrives — for a $45 fee. Annualized, that’s an interest rate of 459%.

Critics of the practice, which has grown as the jobless rate has increased, say these pricey loans are sending the unemployed into a cycle of debt from which it will be tough to emerge.

Many payday clients pay off their loans and immediately take out another, or borrow from a second lender to pay off the first, and sink ever deeper into debt. Typical customers take out such loans about 10 times a year, by some estimates.

Lenders “market the product to give the illusion of assistance,” said Ginna Green, a spokeswoman for the advocacy group Center for Responsible Lending. “But instead of throwing them a life jacket they’re throwing them a cinder block.”

The industry sees it as a service, providing short-term loans to people who wouldn’t stand a chance with a conventional bank.

What’s clear is that in California, where the unemployment rate hit 12.4% in December, some jobless workers in need of quick cash are turning to payday lenders, regardless of cost.

Ed Reyes, a Los Angeles resident who lost his job in retail about six months ago, said he has had to take out payday loans three times since becoming unemployed. The advances on his government check, he said, have helped him pay his household bills before late charges accrue.

“To be honest, I didn’t know if they’d give me one, but they did,” he said, standing outside the unemployment benefits office in downtown Los Angeles.

Ignacio Rodrigues, a clerk at Van Nuys payday lender Ace Cash Express, said about a quarter of first-time borrowers he sees now use their unemployment checks as proof of income.

“They just need extra money, and we do it,” he said of the instant loans.

It’s legal. Payday lending is regulated by the state, but lenders are not required to check sources of income. A borrower needs only to have a bank account and valid identification to get a loan.