OKLAHOMA CITY (AP) — With a sluggish economy, more Oklahomans are turning to high-cost loans with equivalent annual interest up to 500 percent or more to make it through tough times.

A report on Oklahoma’s so-called payday lending industry showed more than 1 million loan transactions were made from July 2007 through June 2008, with the average borrower taking out more than nine loans during that period, The Oklahoman reported Sunday.

The high-interest loans are designed to exploit low-income people who regularly come up short on their monthly bills, said Donald Hardin, former administrator of the Oklahoma Department of Consumer Credit.

“They typically prey on the people who are just getting by in society,” said David Humphreys, a Tulsa attorney who researched the loans helping clients.

But Dylan White, operations manager for Federal Cash Advance of Oklahoma, disagrees.

“‘I’ve heard statistics that 60 percent of the people out there live paycheck to paycheck, regardless of income,” White said.

Many of those people have poor credit ratings and don’t have ready access to credit cards. When a car breaks down or they need to travel to a funeral, they often face few good alternatives, he said.

“The demand is out there. It’s not going to go away,” he said. “I think in the minds of our customers, we’re the best choice of their alternatives.”

A 2003 Oklahoma state law specifically authorizes payday deferred deposit lending and sets maximum interest rates.

There is a general consensus that payday loans should only be used for short-term emergencies and it is not in the best financial interest of consumers to repeatedly roll them over, Hardin and White said.

In fact, state law specifically requires payday lenders to warn customers that the loans are “not intended to meet long-term financial needs.”

The industry's dirty little secret is payday lenders probably would go under if most customers heeded that warning, Hardin said.

“In order to make their business plan work, they have to have rollover customers,” Hardin added. “Why would you design a product that sets people up to fail?”