Herald Poll: Curb payday predators
January 18, 2008
It's way past time for Utah to rein in payday loans, which prey on those least able to defend themselves. A year ago we urged passage of a 36 percent interest cap on such loans, but it hasn't been enacted yet.
A payday lender typically makes loans against a recipient's upcoming paycheck, hence the name. A typical charge is $15 per $100 loaned -- for two weeks. To many borrowers, that doesn't sound too bad. But on an annual basis it's 391 percent. The typical payday borrower can end up paying $793 for a $325 loan. If repayment is late, fees and collection charges can bump the total annual rate to around 500 percent.
Last year we said that was loan shark territory. We stand corrected: we have since heard that back in the Mafia's heyday underworld loan sharks charged only 250 percent.
It is astonishing that almost nothing in Utah law curbs this outrageous practice. Years ago lawmakers ended the ban on usury and opened the door to sky-high interest rates. Last year the Legislature passed a minor reform authorizing fines against lenders who fail to register or otherwise violate the few regulations the state imposes.
A bill to take stronger action -- limiting the number of loans allowable to a person at a single outlet, capping the loan total and banning other outlandish practices -- died in committee.
Sadly, the people most often hurt by these practices are working people who have limited resources. They earn a paycheck, but a medical bill or car repair can put them under financial stress. Some of these folks may have a faulty understanding of economics, but if that were a crime, much of the staff of the New York Times and many members of Congress would be in jail, so we don't see why ordinary working Utahns should suffer. Besides, it is the naive who are most in need of protection from abuse.
We should avoid stereotyping those victimized by payday loan services, however. The AARP reports, for instance, that senior citizens who are still working sometimes are taken in by the sales pitches of the lenders -- of which there are many in Utah. There are so many dotting the state landscape, in fact, that one might assume they are benign. Reportedly, the state is home to well over 400 payday lending outlets -- more than the number of 7-Eleven, McDonald's, Burger King and Wendy's outlets combined.
Utah County has at least its share. State figures say there are about three dozen total in Provo and Orem, and more in other towns in the county.
Critics say harsh lending practices drive
Source :http://www.heraldextra.com
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