Riverdale, Utah – The council in Riverdale has unanimously approved allowing title loan companies to locate in any area that is C3 zoned. This new decision has not included the previous requirement that these payday loan operations be at least 500 feet from a residence.

Riverdale’s payday loans and check cashing companies, along with banks and credit unions, are also allowed to be located in these areas and are now governed by the same rules in the ordinance under a financial institution category.

Councilman Alan Arnold said “we didn’t want to limit the number of title loan establishments in Riverdale, just the location of them. Title loan companies should be allowed along the Riverdale Road corridor, regardless of the proximity to residential areas.”

As most areas seem to be tightening laws regarding title loans/payday loans, it seems odd that Riverdale is making them more available. Administrator Randy Daily did defend the new decision by stating that council can still consider a companies impact on an area when it applies for a business license.

Utah – Mountain America Credit Union had been promoting a financial product called “MyInstaCash”, which was basically a payday loan. The interest rate was a staggering 876% as uncovered by an investigation by the nonprofit online investigative reporting site iWatchNews.

As we all know payday loans are short term, unsecured loans which are usually due to be repaid by the borrower’s pay check. The problem with these loans is that the repayments on these loans often eat up 44% of the paycheck leaving the borrower short of cash and needing another loan. Consumer groups say that these outrageous interest rates are what keeps the borrower in a cycle debt.

These payday loans were provided by Mountain America and other financial institutions by partnering with third party lenders for a finders fee. This is how they were able to get around the interest rate cap. An NCUA spokesman said credit unions are permitted to direct customers to payday lenders from their websites in exchange for a commission fee.

The third-party lender that backed Mountain America’s payday loans was Capital Finance, LLC, located just a few miles from Mountain America’s headquarters in a Salt Lake City suburb, iWatch News reported.

Mountain America has replaced the MyInstaCash loans with a new “Helping Hands” loan which does comply with the rules set by the National Credit Union Administration, that permit federal credit unions to lend at a maximum 28% annual rate provided they follow certain guidelines, one of which is giving customers more time to pay off the loan.

SALT LAKE CITY – Desperate times drive some people to a payday loan they can’t afford.

According to a report by the Center for Responsible Lending, 91 percent of people who go in for a one-time loan end up coming back up to five times over the course of a year. The center calls it a “debt trap.”

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Payday lenders say that almost all borrowers pay off their short-term loans on time and can afford them. However, a computer-assisted analysis of court records by the Deseret News showed that payday lenders sued more than 11,000 Utahns in small claims courts during 2009. In fact, Provo payday lender cases accounted for 88 percent of the small claims court cases.

The Utah Legislature has considered several restrictions on payday lenders in the past, including interest rate caps, but those efforts have failed every time.

The differences between payday lenders and banks and credit unions are vast when it comes to regulation and interest rate caps.
“Credit unions that are supposed to be looking out for the people are offering payday loan products to their customers that are between 254 and 318 percent interest.” – Linda Hilton, Coalition of Religious Communities

Several credit unions are now offering small loans with steep rates. The Utah League of Credit Unions argues the loans are a good alternative to other payday loans and that their members want them.

“The reality is that even our employees occasionally seek payday loans, and we want them to have the best alternative in the marketplace,” said Scott Simpson, president of the Utah League of Credit Unions.

But the Coalition of Religious Communities wants credit unions to pull these types of loans.

“Credit unions that are supposed to be looking out for the people are offering payday loan products to their customers that are between 254 and 318 percent interest,” said Linda Hilton, with the Coalition of Religious Communities.

Several cities have considered restricting payday lenders. Ogden recently limited the number of payday lenders in that city to 15; 21 such lenders already exist within city limits.

The existing payday loan businesses will be allowed to continue operating in Ogden, but if some close, others will not be allowed to take their place.

Story originally published on KLS.com on July 11th 2010. The information in this story may no longer be accurate.