Utah has some of the highest payday lending rates in the nation. That’s according to a new report released this week from the Pew Charitable Trusts. The research indicates that a state’s limit on interest rates is the key factor driving loan pricing. Utah is one of seven states where there is no legal limit.
The report shows that the average annual percentage rate for a payday loan in Utah is 474 percent. Nick Bourke, project director for Pew Charitable Trusts, says rates that high are unnecessary and harmful to consumers.
“In Pew’s research, what we see is the high rates that we see in Utah are not necessary to ensure access to credit,” Bourke says. “Other states have much lower costs, coming by the way from the same companies, offering the same type of loan to the same type of consumer, they have much lower costs because the state law requires it in those states, and access to credit remains available.”
Bourke says the study shows that regulation can improve the short-term lending situation for consumers. The Utah legislature passed some reform this year after the payday loan industry became part of scandals associated with former Attorney General John Swallow. Payday lenders are now required to disclose the terms of their loans before a contract is signed. Consumers have more flexibility to pay back loans, and lenders are required to give a person who defaults ten days notice before bringing any civil action. But lenders are still free to set their interest rates and fees without limits in Utah.