SALT LAKE CITY (AP) - A Utah lawmaker wants to legally prevent payday lenders from allowing clients to rack up new debt to pay old loans.
Rep. Brad Daw, R-Orem, is getting support from both critics of payday loans and member of the industry for his proposal, reported The Salt Lake Tribune (https://bit.ly/2iU7nur ).
“Enforcement will be a challenge,” Daw said. “But it is a negotiated settlement. I’d like to do more, but that is what we were able to negotiate.”
A new Utah Department of Financial Institutions report says the average interest rate on payday loans dropped from 482 percent to 459 percent.
These loans can accrue interest for 10 weeks under state law.
The report says more than 43,500 payday loans were outstanding after 10 weeks.
“If you are getting into debt for a two-week loan, and it’s taking you 10 weeks or six months or a year to pay them off, it’s hard not to call them a debt trap,” Daw said.
Daw was behind legislation that requires lenders to offer delinquent borrowers a no-interest payback plan in writing before taking legal action.
Utah Consumer Lending Association spokeswoman Wendy Gibson says there have been several legislative improvements to the industry in recent years, like offering no-interest repayment and stipulating that lenders need to check whether a prospective borrower can afford the loan they want.
“Consumers are well protected and satisfied with payday loans, which explains why there is an extremely low number of complaints,” Gibson said.
State regulators received seven complaints in 2016.
An audit in 2015 found lax oversight among regulators and recommended new laws.
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Information from: The Salt Lake Tribune, https://www.sltrib.com
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