The thing to do is look at the deeper problem as to why "payday loan" companies started up and are in business.  The people that use them, in most cases are people that were either irresponsible, or had something come up where they need cash immediately.  People that use these places have poor/no credit, so the risk is very high that they will default on their loan, thus the high interest rates.

 

Over-regulation of these companies to force them to accept a lower interest rate would result in most, if not all of them closing up.  Companies won't take the risk and/or lose profit.  This leaves a segment of the population that have a need to use these kinds of companies to have nowhere else to turn.

 

Then consider the scenario where the government backed the loans if the interest rate was brought down closer to a conventional credit card.  Or say the government backed loans to conventional banks if they took on risky loans such as these.  What you have is in essence what the "housing bubble" was.

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