Fines OK'd for payday lenders
But critics call SB16 too weak; they urge passage of HB329
The House unanimously passed a bill by Sen. Ed Mayne, D-West Valley, that for the first time allows fining payday lenders for various disclosure and licensing violations. The Senate unanimously passed the bill, SB16, last week.
Until now, no middle ground had existed between either taking no action for violations or the other extreme of entirely shutting down a payday lender (which regulators said has happened only once).
Penalties will now range between $500 and $1,000 for various violations, not to exceed $30,000 per year. They are imposed at the discretion of state regulators and may also be waived at their discretion.
Both the payday loan industry and its opponents supported the bill. But the industry says that is all the reform needed, while opponents say it is just a first step — and hope for action on a stricter bill introduced Thursday by Rep. Lou Shurtliff, D-Ogden.
"We are pleased that (SB16) passed and feel it gives the commissioner (of financial institutions) tools necessary to effectively regulate the industry," Colt Walker, spokesman for the payday lenders' Utah Consumer Lending Association, said of Mayne's bill.
"It allows penalties that are discretionary and can be waived," she said. She adds that it clarifies provisions that still allow loans to be "rolled over," or renewed, at high interest for up to 12 weeks. She said that is two weeks longer than what even national payday loan industry groups say is ideal.
Linda Hilton, a payday lending opponent who is director of the Coalition of Religious Communities, said that while Mayne's bill "is fine and needed, it does nothing for the consumer. Lou Shurtliff's bill would do a lot for the consumer."
Shurtliff's HB329 would ban payday lenders from giving new loans to clients who already have other loans unpaid with them; require a 30-day term on loans (most are now for only two weeks); and ban extending any loan that is for more than $500.
It would also require disclosure in contracts informing borrowers that they cannot be criminally prosecuted to collect a loan (a claim that critics say is often made), and require lenders to file annual reports with statistics about how many loans they make.
"It would give people more time to pay off their loans. It would help prevent them from getting in too far over their heads, and falling into a cycle of debt," Polacheck said.
Polacheck and Hilton add they would like even more than what Shurtliff proposes. They want to enact the same 36 percent interest rate cap that Congress imposed last year on loans made to military members' families.
You can be the first to comment on this story.