WASHINGTON— The banner ad atop the website features a wide-eyed baby cradled in an adult’s hands with the words, “Did that special vacation for two end up producing a third? Castle Payday has life’s unexpected expenses covered.”

On a growing number of sites like this one, short-term loans are just a click away for Web-surfing borrowers, regardless of any history of bankruptcy, bounced checks or other credit problems.

The catch is that these so-called payday loans often come with sky-high interest rates of 400 percent or more. The Castle Payday website advertises an effective 888 annual percentage rate, meaning a 14-day loan of $500 will end up costing the borrower $675.

Those who can’t scrape together the cash to pay off the loans along with their other bills may be tempted to take out another short-term loan to cover the first, potentially ensnaring them in a cycle of debt.

Consumer advocates complain that companies like Castle Payday are setting up shop on the Internet to avoid laws in some states that restrict or ban traditional storefront payday lending.

“More and more states are cracking down on payday lending and it’s a lot easier to hide online than it is to hide in a storefront,” said Ed Mierzwinski, consumer program director for U.S. PIRG, an advocacy group.

But industry groups contend that online payday loans are legal and provide a vital service for millions of struggling Americans with few credit options.

“Most consumers don’t have the ability to get $500 or $600 in an emergency through their banks or credit unions,” said Peter Barden, spokesman for the Online Lenders Alliance, a trade organization. “Credit card limits have been reduced, equity loans have been reduced, so people are increasingly looking to alternative financial services companies for short-term credit. And like with any other industry right now, they’re looking online.”

Payday loans are illegal in 15 states, including North Carolina, Georgia and Pennsylvania. Nine others _ among them Washington and Florida _ do allow payday loans but enforce strict rules that limit fees, require longer repayment periods or restrict the number of loans per customer, according to a Pew Charitable Trust study.

In recent months, state and federal regulators have intensified pressure on banks to stop working with online lenders. But the industry is fighting back in court.

The legal situation is complicated by the fact that many online lending websites are run by Native American tribes, which say their sovereign status means they aren’t subject to state laws. Castle Payday, for example, is operated by the Lac Vieux Desert Band of Lake Superior Chippewa Indians in Michigan.

The Lac Vieux joined with another tribe this month to seek an injunction against a New York regulator, arguing that states have no authority over them.

Benjamin Lawsky, the New York superintendent of financial services, had sent cease-and-desist orders to Castle Payday and 34 other online lenders to stop them from making payday loans to consumers in New York, where payday loans are illegal. Lawsky also asked more than 100 banks to deny the lenders access to the automated system used to process electronic payments, so that they can’t debit borrowers’ accounts.

In a lawsuit filed in U.S. District Court, the Lac Vieux and the Otoe-Missouria tribe of Oklahoma condemn what they describe as regulators’ “bare-knuckle attack” on tribal sovereignty. If not stopped, the suit warns, New York’s “campaign of misrepresentations, threats and coercion” will destroy tribal businesses and devastate tribal economies.

Tribes located in impoverished and isolated areas need the proceeds from online lending to fund their governments and essential services _ everything from education programs to new fire trucks, said Barry Brandon, executive director of the Native American Financial Services Association, an advocacy group for tribes involved in the online lending business.

“We have had reports from some of our member tribes that the revenues they are producing from their online lending operations are now making up between 25 and 50 percent of the tribal budget,” he said.

Brandon acknowledges there are some bad actors in the online lending business _ including some companies that falsely claim affiliation with tribes _ but he says most tribal businesses operate responsibly and in accordance with federal law.

Unfortunately, non-Indian online lenders often claim tribal sovereignty in situations where their ties to tribes are loose at best, said Uriah King, vice president of state policy with the Center for Responsible Lending in Durham, N.C.

“When we scratch the surface, they don’t look like tribal lenders,” King said. “They look like sham relationships that benefit the lenders, not the tribe.”

In one high-profile case, the payday lending operation AMG Services Inc. in Overland Park, Kan., claimed to be owned by the Miami and Modoc tribes of Oklahoma and the Santee Sioux of Nebraska, yet the tribes reportedly only received 1-2 percent of the revenue from each loan.

The real benefactor allegedly was race car driver Scott Tucker, who used $40 million collected from borrowers to sponsor his racing team, according to a complaint filed last year by the Federal Trade Commission. Sovereign immunity for the tribes is a very serious issue, but it shouldn’t be used as a fig leaf for predatory lending, King said.

“At the end of the day, a payday loan is a junk product that gets people deeper into debt, and it doesn’t matter if it’s a bank or nonbank or a tribe, the reality is that it’s just not a good product and it doesn’t matter who provides it,” he said.

Consumers also should be wary of phony online payday loan websites designed to steal their names, Social Security numbers and bank information, he said.

A federal judge in Illinois last week ordered one such operation in Tampa, Fla., to halt operations after an investigation by the Federal Trade Commission.

The FTC accused defendants Sean Mulrooney and Odafe Ogaga of using websites with names such as Vantage Funding, Ideal Advance and Your Loan Funding to debit consumers’ checking accounts without their permission. Tens of thousands of customers lost more than $5 million to the scheme.

Mulrooney and Ogaga allegedly used the scam to finance luxurious lifestyles, complete with fancy cars _ Mulrooney owned a Maserati GranTurismo, while Ogaga owned a Rolls-Royce Ghost and a Ferrari, court documents show.

“You absolutely have no idea who you’re dealing with when you take out a loan online and you agree to let somebody put their hand in your bank account,” said Mierzwinski, the consumer advocate with U.S. PIRG. “Please step back and think: Is there any other way I can get this money to meet my bills? Because once you go into high-cost payday lending, whether online or in person, it’s not something you do once. It’s usually something you do again and again and again.”

• Lindsay Wise, MTC Campus