To a lender that offers reasonable effective interest rates - the kind of lender that can't currently survive in the business space because such insanely exploitative arrangements are currently legal and muscle out more reasonable lenders.
Interest rates are mostly determined by two things: 1) in what other activity could I invest this money; and 2) what is the probability that I won't be repaid. Well, also a third thing: overhead to run the business.
Payday loans are fundamentally unprofitable if they charge less than usurious rates of interest.
First, the default rate is sky-high: News articles suggest that over half of payday borrowers default within a given year.
Second, the loan amounts are relatively small, but require a retail storefront and staff.
Think about other types of lending: A mortgage is underwritten once per decade and involves 100's of thousands of dollars at once with a three decade term. The band will earn hundreds of thousands of dollars in interest over the course of the loan, so having a banker in a tailored suit spend a couple hours with you is a trivial cost. It's also secured by real property which can be repossessed in the event of a default.
A credit card is underwritten once a decade. The small transactions are mostly automated and much of the risk is pushed onto the merchant. So, again, tens of thousands of dollars can be earned per account. Retail space is not required to scale the business. The default rate is higher and the loan is unsecured, so it carries a higher interest rate.
Now look at a payday loan. Half of borrowers will default each year, and collection rates will be low (the borrowers mostly don't have assets to recover). The term is usually a few weeks, so it requires human interaction 12-26 times per year. The loan amounts are also small, so 1/26th of whatever a reasonable interest rate is isn't enough to cover defaults and all the manual processes.
If you don't believe me, the above statements are trivially falsifiable: Just start your own payday loan company with "reasonable" interest rates and see how long you last.
If the news articles reporting 50%+ default rates are true, your non-profit payday loan company need to charge at least 100% APR just to break even before overhead and cost of capital.
