Shurtleff defends payday loan rates
But debating against that was University of Utah law professor Christopher Peterson, an expert on predatory lending. He said payday loans are essentially legalized loan sharking that can bury the unwary into deep debt. He said societies for millennia have banned the sort of high interest rates that payday lenders now charge.
The pair faced off in the annual Jefferson B. Fordham Debate at the University of Utah's Quinney College of Law, a series that looks at key current issues. They took different sides of whether states should ban any loan with interest rates over 36 percent — which both agree would put the payday loan industry out of business.
Payday loans are usually given for two weeks to those with poor credit. A Deseret Morning News study in 2005 found the median annual interest on them here was 521 percent, or $20 for a two-week $100 loan. Critics contend the needy often cannot pay them off on time and must take out more loans at the high rates to cover them.
Shurtleff said, "I've done a lot of research in this area. And I truly believe in my heart of hearts that the people's good is best served by competition" and allowing payday loans as an option besides such things as bouncing checks or pawning goods.
He added, "It would be immoral to take away from somebody an option ... that allowed them to avoid bankruptcy, repossessions and welfare. That would be immoral: not to give people that opportunity and let them make that choice."
Shurtleff said when he took office, he talked to advocacy groups for the poor who complained about debt pitfalls from payday loans. He said he looked into them and found that the state regulators received few complaints from users.
He said a recent study by staff of the Federal Reserve Bank of New York also concluded that after Georgia and North Carolina banned such loans, former users migrated to costlier alternatives, including bouncing checks (and paying expensive bank fees to cover them), or filing for bankruptcy.
Peterson, who has written books examining predatory lending practices, said that study was flawed and did not control for many variables that could have increased bankruptcies and bounced checks. He said payday loans do hurt the poor.
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