Utah gets failing grade for loan protections

Published: Thursday, Aug. 28, 2008 12:14 a.m. MDT
 |  E-MAIL | PRINT | FONT + - 
Utah is failing consumers by not capping "abusive" interest rates on small-dollar loans that ultimately pull individuals into debt spirals and drag down the U.S. economy, according to a state-by-state scorecard released Wednesday by three national consumer groups.

The National Consumer Law Center, the Consumer Federation of America and Consumers Union listed Utah among 14 states receiving failing grades on four kinds of small-dollar loans: payday loans; auto-title loans; six-month, $500 unsecured installment loans; and one-year, $1,000 unsecured installment loans.

The failing rating came because Utah doesn't cap loan rates at 36 percent or less or prohibit payday or auto title loans. Utah also does not have a criminal usury law, the report said.

The other states with straight F's were Delaware, Idaho, Illinois, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, South Carolina, South Dakota, Tennessee, and Wisconsin. Arkansas, Connecticut, Maryland, New Jersey, New York, Pennsylvania, Vermont, West Virginia and Washington, D.C., met all the criteria the consumer groups recommended.

"Utah is one of the states that sets no limits on what lenders can charge," said Jean Ann Fox, director of consumer protection for the Consumer Federation of America. "As we've learned in the meltdown of the mortgage market ... it costs not only the borrower but the community as a whole."

Story continues below

But Paul Allred, deputy commissioner of the Utah Department of Financial Institutions, says the consumer groups are just sore that they didn't get legislation passed that they wanted. He says the Utah industry is regulated, and interest rates are disclosed verbally and in writing.

"I believe if folks using these products take the time to understand and decide whether it's appropriate for them and keep it short term ... then I think those (regulations and disclosure rules) are adequate to protect people."

Payday lending in recent months has been debated by city and county councils, Utah Attorney General Mark Shurtleff and the Utah Legislature.

Supporters of payday lenders say the industry provides a needed service for low-income residents, high-risk borrowers or those who find themselves in a short-term bind. Opponents say the businesses are predatory and trap low-income residents in debt.

Utah payday loans average 521 percent annual percentage rate in interest. University of Utah law professor Christopher Peterson has said the typical user spends $793 to pay off a $325 loan.

Ten local governments — including Orem, Sandy and West Valley, and Salt Lake County — have restricted the number of payday lenders allowed in their borders. Provo earlier this month started looking at similar restrictions.

Recent comments

If the Payday Lenders are taking advantage of people and lending to...

Hello! | Oct. 21, 2008 at 5:17 p.m.

That is ridiculous that a simple rate cap on loans with a small...

Wag the Dog | Sept. 6, 2008 at 4:24 p.m.

Wow! I may move to Utah. I�ve never heard common sense like that...

Townee | Sept. 3, 2008 at 5:14 p.m.

previousnext

Latest comments

Obama deserves bashing

Let's BASH all who don't believe the way we believe so we can be GREAT...

Good Day. The moment we begin to fear the opinions of others and hesitate to...

Kramer a former Coach at Central Michigan and Vanderbuilt went on to be the...

Millsap is not Boozer period!!!!! Jazz fans wake up and get over the hate for...

Re-Anony: You obviously have no grasp on either humor or sarcasm. However,...

@ “SOCIALISM HAS NEVER WORKED” Remarkable that someone able to...

We have free press, it's just the major news agencies are biased. They are...

You could not be more incorrect. IF the BCS is determined to fraudulent,...

"Those who forget Teddy Roosevelt's words about walking softly and carrying a...

co2 is not a pollution. If universal health care is so great, why is...

Advertisements