PayDay candy bars are a lot like payday loans. They're both a little nutty.

Lawrence raises many valid points in defending PDL providers like Cash International (NYSE:CSH) and QC Holdings (NASDAQ:QCCO), I don't buy all of them, though. He leans on the fact that interest rates are capped in many states. However, as our earlier Texan example showed, interest rates can make up just a quarter of the costs behind a payday loan.

Imagine if you went to Bank of America (NYSE:BAC) to open up a line of credit at 7%, only to see your actual costs come in closer to 28%. Lawrence's pronouncement that the practice is "reasonable and fair" is hard for me to take seriously.

Now, Lawrence is spot-on when he mentions that there isn't a long line of willing lenders out there. That doesn't mean that the PDL players should be canonized. They're still ripping off the desperate and the gullible. Their cash-starved clients aren't crooks. The default rate of just 2% on these loans bears that out. That's why I'm not buying that payday loans are a great deal because they don't ruin your credit. It's a moot point in most of the quick-cash cases. In the others, it creates a long-term dependency on a money-sucking medium that gets in the way of establishing any type of credit to begin with.

It's sad to see that traditional banking hasn't taken an interest here. Credit unions have, but we have to be realistic here. The cash-strapped folks willing to slice up their future paychecks aren't likely to set up long-term relationships with traditional banks or credit unions.

That's why payday institutions may be necessary -- but not in their present form. They need to be cleaned up. Customers need to be informed how much they're giving up for floating a check for two weeks. Lawrence writes that we should let the market take care of itself. I argue that we need to educate the market first. Then let the enlightened consumer guide market forces.

You're not done. This is just one part of a four-part Duel! Don't miss Rick's bearish opening salvo, Lawrence Meyers' bullish argument, or Lawrence's last word. When you're done, you're still not done. You can vote and let us know who you think won this Duel.

Longtime Fool contributor Rick Munarriz knew it would upset the mix even more if he made the distinction that loan sharks were cold-blooded creatures. He does not own any of the shares mentioned in this argument. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.