why do they lend?

Because most consumers don't know that, and therefore can be easily taken advantage of. Kind of like mechnics that try to charge you for headlight fluid and muffler bearings, because they are betting that you don't know any better.

Oh and chances are they WILL get their money back. Bear in mind payday loans carry around a 400% apr, so in theory three out of four debtors could never pay them back, and they'd still make a profit.

Sounds good in theory, but reality is a company using your scenario will be broke in no time. For each loan that goes bad, it would take 4 like size loans just to cover the lost principle at $25 per $100.

Reality is that they will make money because the illegal lenders use strong arm tactic to collect because they actually have no recourse when one chooses not to pay.

Thanks for the correction PDL, I had a feeling my math was a little off, but my main point was in the mechanic reference, which you reiterated perfectly by referencing the strong arm tactic.

There will always be good and bad apples in the lending bunch. The most important thing is to do thorough research, make sure you're dealing with a legitimate company, ask questions, and fully understand what you're getting into before agreeing to any Payday Loan or other.