Kaufman said when his office uncovers the name of the payday lenders' institutions — little-known banks outside of Maryland — it has turned over the information to the appropriate federal regulator.

He declined to name the banks, citing continuing investigations, except one — Bay Cities Bank. In a consent order with the FDIC in May, the Florida bank agreed to stop originating automatic withdrawals on behalf of payment processors. Bay Cities did not return a call seeking comment.

The Pew's Horowitz said it has been complicated for states trying to enforce their laws against Internet payday loans. Online lenders claim they are exempt from state law because they are offshore, incorporated in another state or affiliated with an Indian tribe, he said.

Peter Barden, a spokesman for the Online Lenders Alliance that represents 130 members, said these lenders are not subject to state laws.

"We believe the companies who are operating on the Internet are abiding by federal law," he said.

Marylanders and residents in other states with rate caps are going "online to get short-term loans because it's convenient and easy, and they can't find that kind of financial product in their states," he said.

And if there's any problem with a bad payday lender, he said, consumers can always tell their bank to rescind the debit authorization, he said.

Kaufman said though banks increasingly have been willing to help consumers, many times the loans from bad payday lenders are sold to shady debt collectors that violate collection laws.

Kathleen Murphy, president and CEO of the Maryland Bankers Association, said banks are willing to work with regulators to address consumer complaints. But having an informed and educated consumer is also needed, she said.

"At the end of the day, it comes down to the consumer making smart financial choices," she said. "To decide they need an advance on their paycheck at an interest rate of 500 to 600 or 700 percent annually is not a smart financial decision."

eileen.ambrose@baltsun.com

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