In simple terms, a payday loan is advance on your next paycheck. There are many companies throughout the country that offer these very short-term small loans. The term, or length of time you have to pay back the money typically runs from 2 to 4 weeks. The fees or costs of this short-term loan can be anywhere from 25 to 50%. And this is where the FTC comes in with their complaint.

The government agency spends a lot of time acting like they help consumers. The government has the authority to make changes in how these loans are offered if they were really interested in helping or protecting consumers. Instead however, they state that the APR or annual percentage rate of the small loans is in the hundreds of percent in the are right, but that's not the whole story.

Everyone knows that when you buy a product in a small package it costs more. Larger or bulk packaging usually costs less. Now consider how this fact as it relates to the payday loans.

Consider these facts:

1. A payday loan usually is anywhere from $200-$500 dollars. In the lending business, this is a very small loan amount. It's reasonable then, that the cost of this service would be more expensive than a larger loan.

2. A payday loan is as much a service as it is a loan. Although a bank or credit union may offer a lower interest-rate, how many of them would be willing or able to front you a couple hundred bucks to tell your next paycheck?

There's also no way a bank or credit union would be able to process your loan in just a couple of hours like a payday loan service does every day.

3. Consider payday loans in their costs against other purchases.

When you buy something at the store, the price charged can be broken out into two parts. The first part is the actual cost of the product. The second part is called a markup. A markup is simply the difference between the actual cost of the product and what you are charged as a customer. The markup covers the building, employees, and other costs of running the business including profit.

When going out to dinner with food cost is a very small part of the overall total you're charged. Furniture, jewelry stores and many other retail shops have markups that are much larger than a typical payday loan that's payback on time.

Jewelry stores and many other retail shops have markups, which is the amount of money over the cost of the product, that are much higher than in on-time payday loan.

So when you look at a payday loan as a service, and the fact that when the loan is paid back on time, the actual interest and fees are really quite reasonable. I would not disagree with the FTC that keeping a short-term payday advance loan active and continue to roll it over can be very expensive.

The use of a payday advance loan in an emergency situation and for a short period of time can really be a lifesaver.