I'm generally not a fan of regulation. But lately, I've been changing my opinion on that. I don't see how we can all play in the economy game without having a set of unambiguous rules and referees to enforce them. Regulations do add overhead, sure, but how else can we prevent companies from acting in ways that are detrimental to society? Capital finds the shortest path to profits, and without rules, it becomes a quic…
Sure you'd love to make 20% returns, and so would literally every person who has cash. If there were a pool of people willing to pay 20% interest without the risk of default or non-payment, then everyone would be out there lending to them, and the market would saturate, and someone would say "hey, I could get more customers with 19% interest", and so on, until you basically can't charge more interest than nominal market rates for interest. That's the "race to the bottom" of capitalism, not the increased number of shady tricks that you would pay to get the 20% return.
The reality is somewhat different from two axes. One is the regulatory axis; you can't just up and start making payday loans; there are huge regulatory burdens that come with it that exist as a moat to keep out new players in the market by increasing the cost of compliance.
The other is more direct and unrelated to regulation; the 20% is not realistic -- non-payment and default do exist, and you have to collect in order to avoid making huge losses, so with the total costs involved, the actual rate of return on this class of loans ends up being not much better than free-market interest rates anyway; you can get additional returns by improving quality of service or offering better features, or reducing the cost of collections, or, in this case, using the ability to charge fees to try to recoup some of that loss.
So what you end up with is a system where the problems inherent in #2; subprime lending is risky and encourages taking advantage of customers, which leads to regulation, which makes things worse by limiting the competition, and eventually leads to a spiral where we keep thinking that we can solve the problems caused by the previous regulation with more regulation. And eventually someone breaks out of the cycle by offering the same product but just slightly different enough to not be covered by the regulations; they take over the market and then everyone copies them, and then we start the regulation game again.