Payday loans tempt consumers with a little extra cash before their next paycheck arrives, but with average interest rates that exceed 400%, it's difficult to call them anything other than legalized loan sharking. The Washington, D.C. City Council last month voted to eliminate an exemption to district law requiring a 24% cap on consumer loans. Several states, including Ohio, also are considering payday loan interest rate caps this year, the Center for Responsible Lending says. The U.S. Congress passed the Military Lending Act last year, restricting interest rates to 36% for U.S. service members and their families. The law is beginning to be implemented this month. The major problem is that although payday loans are advertised as one-time, quick-and-easy loans for an emergency, the reality is quite different. "Several studies have shown that payday lenders tend to charge the maximum permissible rate allowed by state law," says Uriah King, policy associate at the Center for Responsible Lending. "The only consistent exception we see to this is when some payday lenders offer the first loan for free. "That's because payday lenders don't compete on offering the best price or service -- they 'compete' in the sense that lenders work very hard to get people in the door and keep them by trapping them in a series of hyper-expensive, repeat transactions that the borrower can't really afford to pay back without taking another loan. Borrowers that don't have $300 now won't have $350 by their next paycheck, and also be able to pay their regular expenses like rent, food and utilities," King says.