I have not heard how lenders are supposed to "make sure the borrower can afford to pay it back." I suppose that will result in a number of law suits from borrowers, claiming that the lender did not make sure that they could repay the loan; In that case, I guess, not only will the lender be on the hook for a number of loans, but may potentially face regulatory and civil sanctions.

What the Pew and Fed data shows is that the total obligations taken on by us as Americans, especially in the form of discretionary regular monthly payments (car lease, credit card payments, cell phone, cable TV, internet access, etc.) puts so much cashflow pressure on people making $45k/year, that many of them resort to payday loans, even thought they are theoretically sophisticated enough to understand the incredible financial cost of such loans.

At the end of the day, for a large number of consumers, this becomes a matter of choice and priorities. To that end, I guess the government is trying to social engineer better behavior, which in most cases, back fires with all kinds of unintended consequences.