A bill imposing new restrictions on payday lenders in Utah passed a crucial vote in the Utah Senate today. HB127 requires payday lenders to disclose the terms of their consumer loans, including the typically high interest rates, before a contract is signed. And the Lenders won’t be allowed to pick the courts where they file lawsuits against borrowers who default either.
Sen. John Valentine, R-Orem, cited the example of a payday lender in St. George.
“But you could, in fact, by contract, require ‘em to go to Tremonton to litigate it," he says. "This provision makes it so you cannot do that.”
What the bill doesn’t do is put a cap on the interest rates charged by payday lenders. They can go as high as 15-hundred percent when you add in late fees and other charges. Sen. Mark Madsen, R-Saratoga Springs, said the payday lending industry shouldn’t be vilified when banks often do the same thing.
“I was amazed at how the fees from the bank piled up," Madsen says. "And I think that this individual would have been well advised to go and get a short-term loan. As egregious as the rates may appear, they pale in comparison to the bank fees that sometimes pile up.”
HB 127 has already passed the House. It needs one more vote in the Senate before it goes to the governor. The effort to reform payday lending standards in Utah grew out of the investigation of former Attorney General John Swallow. He raised significant amounts of campaign money from payday lenders that wasn’t disclosed because it was funneled through a third-party political group.