While riding a a bus on Chicago's South Side last week, I noticed a particular sign amidst the CTA's ubiquitous row of advertisements offering consumers "checkbook loans."

The sign touted these loans as an alternative to payday loans and their notoriously high interest rates.

But what are "checkbook" loans?

This Chicago Sun-Times editorial hosted by the Woodstock Institute provides some insight into this "new" type of short-term loan that supposedly replaces the evil payday loan.

Illinois attempted to curtail some of the state's payday lending practices by passing the Payday Loan Reform Act in December 2005.

The act brought restrictions on terms of loans, interest rate caps and other mechanisms to prevent overborrowing.

However, payday loan stores found ways to skirt the regulations.

For example, the regulations were put in place for loans under 120 days, but payday loan stores retaliated by making over 1/3 of their loans longer than 120 days, avoiding the restrictions.

To make up for their losses under the restrictions, the companies charged even higher rates for the new loans.

Further, they began marketing the loans under new names to avoid the stigma of the term "payday loan": the new loans were often called "installment" or "checkbook" loans, according to the editorial.

The lesson here is that consumers should always pay careful attention to the terms of loans from cash advance and payday loan stores, no matter what they're called.

Don't let a little change in terminology pull the wool over your eyes. These types of loans have led people to filing bankruptcy.

Tags: checkbook loans, filing bankruptcy, loans, payday loans