Forbes readers will be forgiven their confusion after reading a recent profile of Martin Eakes, a leading anti-predatory-lending crusader.

Headlined “Subprime’s Mr. Clean,” the piece is accompanied by a photo illustration of Eakes in a knight’s armor with blotches of mud on it. The subhead says, “Martin Eakes campaign to straighten out subprime lending has some wrinkles.”

Clearly, Forbes wants its readers to know there’s something wrong with Eakes, who heads the Center for Responsible Lending, a Durham, North Carolina, nonprofit that has made a name for itself with valuable research on, and prescient warnings about, abusive practices among subprime and other bottom-tier lenders.

Trouble is, Forbes can’t find any facts—not even one—that even remotely qualify as mud. To support its premise, the piece crosses the line from tough to unfair by trying to cast benign or irrelevant facts as somehow sinister.

Even Forbes’s headline is wrong. Eakes’s campaign to straighten out subprime lending has no “wrinkles” at all, or at least Forbes can’t find any. The story in fact has little to do with subprime mortgages, but instead focuses on Eakes’s campaign against payday lending, a form of cash advance, which is not the same thing.

Payday lending, by the way, is even ranker than subprime mortgage lending, which, despite years of diligent research in sub-basement laboratories, has yet to find a way to charge the working poor 400 percent annual interest rates, as payday lenders do.

So, no—zero—wrinkles found in Eakes’ anti-subprime campaign. As for his utterly laudable anti-payday lending campaign, there really aren’t any wrinkles there, either, as we’ll see.

That’s a lot of problems for a 700-word story.

Stephane Fitch, the lead writer, a Forbes veteran and a fine reporter, said in an interview that Eakes needs a look because, among other reasons, he’s now an influential figure in banking circles and on Capitol Hill, where Congress, the Fed, and the Bush administration are hammering out a borrower rescue bill.

Okay. I’m all for tough reporting, and Eakes is certainly fair game. But the facts have to support the premise.

The reason all this is important is that there’s a war of words on, and business-press readers ought to be aware of it. The financial-services industry—from the payday crews to Goldman Sachs—is rightly being blamed for breathtaking corruption that led to the cratering of the U.S. economy and global credit markets. Subprime and payday lenders in particular are fighting hard to fend off long-overdue reforms aimed at shutting down their three-card-Monte business practices. Eakes and his group exposed abuses in subprime and other lending—mostly by doing the research and reporting, it should be added, that put business-news organizations, including Forbes, to shame.

Now the Swift Boat-style campaigns against borrowers and their advocates have begun; business journalists just need to be on guard.

The story begins by describing Eakes, accurately enough, as the Ralph Nader of the lending business, citing his role in pushing states to ban payday lenders and abusive mortgage-lending practices, such as high mortgage-broker fees, which provide brokers with incentives to stick borrowers with bad loans, and prepayment penalties that trap them in those loans. Eakes, Forbes says, is also pushing Congress to ban prepayment penalties nationwide and, critically, to allow bankruptcy judges to rewrite mortgage terms. True enough.

The Forbes story includes a self-deprecating quote from Eakes:

“Half the people I know say they’d take a bullet for me, and half say they’d be happy to provide the bullet,” he says.

And adds:

So far his enemies’ weapons are limited to pointed remarks about his claims.

That “so far” is a cheap shot, but never mind.

The story then veers into a defense of payday lending, which Eakes has fought to ban.

An outgrowth of the check-cashing business, payday lenders provide small amounts of cash to strapped borrowers who need a job and a bank account to qualify. For a $300 loan, a typical amount, a borrower writes a check for $345, post-dates it to the next payday and gets $300 cash. On payday, the lender cashes the check and the loan is extinguished, in theory. The payday industry claims exception from state consumer lending laws because its loans are supposedly “short term.”

In fact, though, and not surprisingly, 90 percent of payday loans are rolled over, most of them more than five times. Why? Because someone who needs a 400 percent loan is probably too strapped to pay it back. This so-called product CRL rightly calls “financial quicksand.”

Payday lending is illegal in eleven states, including blue state New York and red states Georgia and North Carolina, Eakes’s home base. Even President Bush signed a law capping consumer loans to military families at 36 percent, protecting them, at least.

So, a defense of the payday lending industry shouldn’t be taken lightly, and yet Forbes relies on a single unpublished paper.

The magazine quotes from a working paper by Donald P. Morgan and Michael R. Strain, two economists at the New York Federal Reserve, who argue that eliminating payday loans doesn’t help but hurts struggling borrowers.

In his November report Morgan shows the Center for Responsible Lending has overstated the number of problem borrowers and argues that bans lead to more people bouncing checks, filing for bankruptcy and fighting with collectors.

The paper is available here.

The paper is a good-faith attempt to rethink payday lending, but it is an academic work that relies on assumptions that only an economist could make. I wish Forbes had applied its usual skepticism to this paper before giving it such currency.

The paper, for instance, calls payday loans “popular with customers” and says that “absent shocks or subterfuge, rational householders keep themselves free of debt traps and predators’ clutches.”

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