05/24/2010 11:59 pm ET | Updated May 25, 2011

Yes, the Payday Lenders and Other Fringe Financers Are to Blame.

You'll hear it a lot in the coming days in the continuing debate over financial reform.

All those fringe financiers who think their industries should be exempted from a newly proposed consumer financial protection agency: they'll remind us that it was the subprime mortgage lenders, Wall Street, and the credit rating agencies that got us into current economic mess, not them.

The payday lenders have been saying it loud and often for months now: crack down on the banks but leave us alone. "Payday lending did not cause the financial meltdown that brought the U.S. and world economies to the brink of disaster," says Lynn DeVault, chair of the payday lender trade association.

The payday lenders are not alone. The country's pawnbrokers have been repeating the same refrain, as have those in the strange business of offering instant tax refunds to the working poor (typically at triple digit loan rates). Indeed, the country's auto dealers hammered at this argument so often in recent weeks that they seem to have swayed votes in the U.S. Senate, which Monday evening voted to exempt businesses that sell cars from oversight by this proposed new consumer agency.

Ed Tonkin, an Oregon car dealer and chairman of the National Automobile Dealers Association, repeated to anyone who would listen that the financial reform package working its way through Congress "was to deal with problems on Wall Street and unscrupulous mortgage lending. We don't belong in this bill."

But, really, is that the way government should work?

If you're not directly to blame for the current crisis, then you get a free pass until you cause a national recession of your own?

Plus: are these non-mortgage bare-knuckle lenders truly blameless in the economic meltdown?

They are, after all, subprime lenders by any other name, except instead of high-priced mortgages, they're peddling subprime car loans carrying annual interest rates of 18 or 20 or 25 percent or two-week cash advances at rates literally more than twice those charged by the corner loan shark.

In Missouri, for instance, the payday lenders can charge rates that work out to more than 600 percent in annual interest. Not exactly a recipe for "financial stability," as Arianna Huffington wrote recently.

Like the subprime mortgage lender, these businesses work the same easy-credit landscape. They cater to those with tarnished credit in a country at once comfortable with, and addicted to, debt. They all sell financially dangerous products, except the person getting him or herself in trouble with a payday lender or a used car financier doesn't necessarily lose a home in the process or find themselves in court seeking bankruptcy.

Still, the payday lender and also the subprime credit card companies seemed to have hastened the trip to the poor house for more than a few borrowers once the housing bubble burst.

In those first months after the country's deep slide into a recession, every third or fourth client who Chuck Roedersheimer, a bankruptcy attorney with Thompson & DeVeny in Dayton, saw in his office owed money to at least one payday lender. Usually that's because the person felt themselves drowning financially - and borrowing from the corner cash advance shop proved so easy.

"One thing I've learned in this business, people will do whatever they can, even if it makes no sense, to avoid losing their house," said Roedersheimer, who specializes in foreclosure-related bankruptcies. First they would max out their credit cards, he said, "and then they'd start hitting the payday loan stores."

The person taking out a payday loan to help pay the next mortgage is just forestalling the inevitable. But even a few people I spoke with inside the payday industry sees theirs as a business in need of reform.

One was Billy Webster, who as the co-founder of Advance America, the country's largest cash advance chain, is a payday pioneer. Like the subprime mortgage companies, the payday lenders took advantage of the same deep and restless pools of capital available during the first part of the 2000s. With ready cheap money, Webster watched as the industry he helped to get off the ground expanded so aggressively that, by 2006, there were more payday stores in the U.S. than McDonalds or Burger Kings combined.

The industry overbuilt, Webster told me when I visited him in Spartanburg, South Carolina - and overbuilt by a lot. To make his point, Webster, who got his start in business as a franchisee for Bojangles, harked back to his fried chicken days.

"You'd never have seen a Popeye's and a KFC on the same corner as a Bojangles," he explained. "But that's what you have now [with payday lending stores]. So you end up not just with saturation problems from a business perspective but also multiple loan problems."

Someone owing $1,500 or $2,000 to three or four payday lenders and drowning in fees didn't cause the world's credit market to freeze up. But it's still destructive debt -- and isn't that what it's all boiled down to when considering the economic misery of the past couple of years?

And so long as we're thinking about financial reform, shouldn't one goal be a safer, more sensible financial marketplace than in the past, whether someone is shopping for a $200,000 home loan or a $200 cash advance?