Salt Lake City battles payday loans
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.”
Sunday Edition: Payday lending and achieving financial freedom
KSL explores the practice of payday lending and discusses Deseret Media Companies’ new campaign to help women gain financial freedom.
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.
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