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Credit Slips digests a recent article in the Journal of Economic Perspectives on Payday Loans. The article's answer to why banks don't offer low-cost, short-term, unsecured loans is that banks find fees, like from bounced checks, more profitable. Bob Lawless disagrees, offering this alternative explanation:

...it is more advantageous to the individuals who make decisions in banks to stick to traditional fee-based revenue streams that are booming rather than staking their career on an untested product.

A few scattered credit unions have given it a whirl, but major banks should step up. C'mon boys, new revenue stream. — BEN POPKEN

Stegman on Payday Lending [Credit Slips]
(Photo: northernplateguy)

UPDATE: Ralph writes, "US Bank does, and has been for I think a little over 6 months. I happened to log on to internet banking and saw the option to request an advance pop up just above my account info. There is a $500 limit and it pays off once a direct deposit hits your account. It looks like the rate is 10% of whatever you request."

: http://consumerist.com/consumer/payday-loans/why-dont-banks-offer-padayesque-loans-just-with-lower-interest-244417.php