WARWICK -- Cars break down. Rents come due. The temperature drops. And cash-strapped consumers pull up to a storefront where desperation is answered in big green letters that say "Cash Advance."

A man with gray hair peeking out of an Army cap enters the Check 'n Go and steps up to the bulletproof glass. He shifts his weight, exposing work boots worn low at the heels.

"I left my pay stub at home," he says to the teller. "I want to re-loan."

By "re-loan," he means pay off his current loan and immediately take out another. The teller assures him that a copy of his pay stub will do. He carefully unfolds a sheet of paper filled with cash and begins to count.

In a society where consumers depend more than ever on borrowed money, the business of providing consumer credit is no longer limited to banks, mortgage lenders or even credit-card companies. In Rhode Island, as in many other states, people in need of quick cash are turning to "payday lending."

Payday lenders generally offer consumers small cash advances -- of less than $500 in Rhode Island -- for a minimum of 13 days or until the borrower's next payday. The borrower typically writes a personal check for the amount of the loan, plus a "finance charge." The lender agrees to hold the check until the due date, at which time the borrower promises to return with the full loan amount, plus the fee -- in cash.

The rates charged on payday loans generally far exceed those on mortgages and other consumer loans.

For example, payday lenders in Rhode Island can charge up to 15 percent of the loan value. (For a $100 loan, the borrower would write a check for $115.) The state law allows payday lenders to make loans, including fees, of up to $500. So payday lenders in Rhode Island offer a $435 loan for which they charge a fee of $65.

By contrast, the same $435 loan from a bank or credit union, which are subject to state caps on interest rate charges, would cost no more than $3.51.

Rhode Island and New Hampshire are the only two states in New England where payday lending is legal.

Nationally, 11 states have enacted laws which effectively outlaw payday lending, according to a Washington-based research group, the Center for Responsible Lending.

PAYDAY LENDING has become a growth industry in Rhode Island since July 2005 when the General Assembly enacted legislation that increased the allowable "deferred deposit transaction fees" from 10 percent of the loan amount to 15 percent.

The legislation, introduced at the request of the payday lending industry, stirred debate about whether the higher rates would hurt people in poorer communities, recalled the House bill's main sponsor, Rep. Jan P. Malik, D-Warren.

Malik, who owns a liquor store, describes the concern as a futile effort to protect the public from making their own decisions.

"As a businessman," Malik said, payday lending is "just another option -- another service to the state of Rhode Island."

Malik compares offering payday loans to selling liquor. "Alcohol, if drank properly, isn't a bad thing," he said. "But there are people out there who might use and abuse it. . . Am I gonna be the righteous person and say keep all these things out of Rhode Island? No."

Payday lenders say their target customers are middle-class working people such as Dennis White, a 56-year-old former Army mechanic who drives a truck for a steel company. The work, when he has it, pays $16 an hour. Some months, after paying the rent on his house in Coventry, car insurance and electric bills, he comes up short.

It was a Friday afternoon when White stopped into the Check 'n Go in Warwick. He owed $460 for a $400 loan he'd taken out about two weeks earlier. He needed to borrow another $400. Together, the two loans cost him $120.

"It's a little bit steep," White said, "but sometimes you need it."

He gave up on credit cards. "I had two or three of them," White said, "and ran 'em up." He landed in credit counseling.

Now, he keeps one credit card for "emergencies only." And when he runs low on cash, he stops at Check 'n Go. "It's a lot better than going bankrupt," he said.

The high rates charged on payday loans have come under increasing scrutiny, particularly with respect to military personnel. A highly publicized Pentagon report found that payday loan centers have opened up near military bases and become a magnet for cash-strapped military families.

Lawmakers in Washington this year passed an amendment to the defense spending bill that sets a 36-percent cap on the annual interest rate for loans to service members. The cap would not apply to civilians.

Payday lenders contend that in order to make these small, short-term loans profitable -- and to offset the risk that the debts won't be repaid -- they must charge interest at rates that far exceed those for other types of consumer loans.

For every $100 it lends out in Rhode Island, Check 'n Go has to make seven loans at $15 each "just to recover [the $100] principal," said John Rabenold, spokesman for Check 'n Go in Ohio.

Comparing the rate charged on a 14-day cash advance with the rate on a car loan or mortgage, Rabenold said, is like comparing apples with oranges. A better comparison, he said, is with bounced-check fees.

"If you bounce that check, even with overdraft protection, you're getting charged about 30 bucks," Rabenold said. "[And] the merchant's going to charge you late fees and overdraft-protection fees, so it's probably 50 bucks."

Payday lenders began to pop up during the early 1990s, he said, when banks and credit unions abandoned the "small-dollar loan market." The payday lending business picked up in the mid-1990s, as banks raised their fees for bounced checks and overdraft protection, making life more costly for working people who live paycheck to paycheck.

Bottom line, Rabenold said, is that payday lenders offer consumers a better deal than the charges they face if they bounce a check. "If not for high bank fees," he added, "we'd be out of business."

State usury laws aim to protect consumers from onerous interest rates on loans by setting caps on the annualized percentage rate, or APR. Rhode Island has set the cap at 21 percent.

The interest rate charged on mortgages, car loans, bank lines of credit and even credit cards is calculated on an annualized basis, or what it would cost the consumer to repay the loan over a 12-month period.

By contrast, the interest rate charged by payday lenders is calculated as a percentage of the loan amount. So a consumer who borrows $100 from a payday lender can be charged $15.

Here lies the rub: A payday lender in Rhode Island can charge up to $500 for a two-week loan of $435, at a cost to the borrower of $65. The APR on that loan would come to nearly 390 percent.

The same $435 borrowed over a period of two weeks from a bank or credit union, where the interest rates are capped at annual rate of 21 percent, would cost about $3.51.

(Payday lenders are required by the federal Truth in Lending Act to disclose their finance charges as an APR, presumably so consumers understand what they are paying.)

In states where payday lending is legal, the allowable finance charges can run as high as 25 percent of the loan value, said William P. Staderman, president of the industry trade group, The Rhode Island Association of Financial Services Centers.

"It's not unreasonable to ask for 15 percent," said Staderman, who wrote Rhode Island's payday lending law. "It's a very high-risk business. . . . If the customer had the money in the account they wouldn't be giving us the check and asking us to hold [it]."

The Rhode Island Department of Business Regulation's executive counsel, Richard W. Berstein, says the state's payday lending law "has, in fact, superseded the state's overall usury laws." As a result, he said, payday lenders "cannot be liable for charging that usurious rate."

Check 'n Go store manager Robert J. Simone spent a decade as a bank branch manager before he landed in the payday lending business.

"You've got to remember one thing: People who borrow have unpaid expenses," Simone said. "They're in a crisis."

The crisis may be a car that needs repair or the rent coming due. The latter is what brought a middle-aged couple from Warwick to the Post Road Check 'n Go late one Friday afternoon.

"How does this work?" said the man as he stepped up to the teller. His wife, her expression weary, sank into a plastic chair next to a welcome table with cold pizza.

On the wall behind her hung posters with smiling, well-dressed people and the words "Success."

"That's the most you can get is $435?" the man asked the teller. "That's not gonna be enough."

He turned to his wife.

"It's up to you," she replied.

The man explained their situation. Their adult daughter with whom they have a joint bank account recently moved out on her own. She was doing her banking on line and accidentally paid all her bills from their joint account, draining it. Now, the rent was due and they didn't have the money.

"I've got like $300 or $400 in overdraft charges," he said.

The man works at an electrical company in Attleboro, Mass. His wife works two jobs: as a private-duty nurse and at a packing company.

He waited as the teller examined some papers.

"We need to make sure the checking account is active," the teller said.

The man shifted from one foot to the other. He shuffled papers.

"I have everything but the bank statement," he said.

Silence.

"What time do you close?"

larditi@projo.com / (401) 277-7335