Democrat Jean Welch Hill proposed Thursday to tighten restrictions on payday lenders, in sharp contrast to her opponent, incumbent Attorney General Mark Shurtleff, who is an outspoken defender of that industry.

Payday loan stores in Utah charge an average 521 percent annual interest, about $20 per $100 borrowed on a two-week loan. Critics contend that the poor are lured into loans they cannot repay on time and then spiral into deeper debt as they take out more payday loans to pay off earlier loans.

Shurtleff has said, however, that such loans are often a better deal for the poor than such alternatives as bouncing checks or paying late fees on utilities or other bills. Amid his defense of that industry, payday lenders have donated nearly $60,000 to his campaign.

Hill called Thursday to limit the interest that payday lenders can charge to just 36 percent annual interest. She also proposed limiting the period that borrowers can "roll over" or extend loans from the current 12 weeks to just four weeks.

"A 36 percent rate is still quite high, but it would restore a modicum of fairness to the system and probably encourage the most unscrupulous lenders to leave the market," Hill said.

Congress recently imposed a 36 percent limit on payday loans made to members of the military. When that happened, payday lenders in Utah quit making loans to military members — saying they could not make money on the small fees such rates allowed.

Hill said shortening the time for "rollovers" is needed because "the payday lenders' business model is based on the expectation that the borrowers will need to roll over their loans when the first two-week loan expires. That triggers more hidden fees and more interest, trapping borrowers in a downward spiral of debt," she said.

Hill said she also opposes provisions in most current payday lending agreements that allows payday lenders to sue customers in courts nearest the headquarters of the lenders — which may be far from where borrowers live.

"It is completely unfair for a payday lender to bring a lawsuit in Provo against a borrower who lives in St. George," Hill said. "By definition, payday lending customers live paycheck to paycheck. They can't afford to travel across the state to appear in court, and that means they're likely to be saddled with a potentially catastrophic default judgment, regardless of the merits."

A Deseret News study earlier this year showed that payday lenders filed 58 percent of all lawsuits in small-claims courts along the Wasatch Front last year. In Provo (headquarters of Check City), they filed 81 percent of all small claims cases.

"I think continuing to do nothing is immoral," Hill said. "The attorney general should be protecting consumer from loan shark tactics, and that's what I would do if elected on Tuesday."

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