Utah Rejects Payday Loan Bill

By: Javi Calderon
Utah Rejects Payday Loan Bill

A bill designed to keep consumers of payday loans from taking out multiple loans at a time was rejected by the Utah House Business and Labor Committee on Wednesday. The committee voted 9 to 4 to kill the bill.

The bill would have created a database to list Utah citizens who have taken out a payday loan and have yet to pay it back. Payday lenders would be prohibited from extending a cash advance loan to anyone whose name is listed. The goal is to prevent borrowers from taking out multiple loans and falling into a cycle of taking out loans to pay back other loans.

Republican Representative Brad Daw, the bill’s author, believes loan lenders pressure consumers into taking out more loans to pay for their existing ones.

Wendy Gibson, who testified on the behalf of the payday advance industry pointed out that lenders allow customers the opportunity to set up long-term, interest-free payment plans if they are struggling to pay off their loans within the original loan term.

Many committee members, including Republicans Francis Gibson and Michael Morley, believe that government should not be asked to safeguard people from making bad decisions.

Critics questioned if lawmakers were influenced by political donations made by payday lenders. The National Institute on Money in State Politics show that the payday loan industry donated over $51,000 in support of Utah politicians during the 2010 elections.

Utah payday loan lenders typically charge $20 for a $100, two-week-long loan. Though this seems reasonable enough, legislators have been using APR to show interest rates. The annual percentage rate (for this two week loan) is 521%. Obviously that number looks enormous and is incredibly deceiving.

4 out of every 10 small claims cases filed in Utah’s small claims courts are payday lenders pursuing payment from consumers.