While payday lenders in Utah face relatively few regulations, Deseret Morning News visits to 67 stores showed that about a quarter of them still broke at least one of even those easy rules.

The Deseret Morning News also found lenders who made misleading claims to a reporter asking about loans. It found fine print in applications and contracts that could easily lead to financial disaster and surprises. It found stores offering many other high-priced loan products to the financially troubled.

Many bills have been proposed in the Legislature to more tightly regulate the industry, but few have passed.

Critics blame that on some surprising, powerful allies of the payday loan industry: mainstream banks that oppose limits (even very high ones) on interest rates. They want to preserve Utah's wide-open, let-the-market-rule financial atmosphere.

Such allies are powerful. The financial industry is the largest donor to members of the Legislature, providing $1 of every $8 raised by them in the last election.

How loans work

Payday loans are quick, available for even those with horrible credit, and help customers avoid the embarrassment of asking relatives or friends for money. But the loans come at extremely high interest.

Payday lenders generally loan between $50 and $1,000 to anyone who has been employed three months at his current job, has a checking account, has a utility bill to prove his address and is not in bankruptcy. The loan is usually due on the employee's next payday, or in two weeks. Most stores advertise that they do not check applicants' credit.

A borrower is asked to write out a post-dated check for the amount he is borrowing, plus the interest and fees he will owe. For example, if he borrows $100 at the common 521-percent interest rate, it will cost him $20 for two weeks. So the borrower writes a post-dated check for $120.

If a borrower does not pay off the loan in cash before it is due, the lender will deposit his post-dated security check. But a borrower usually does not have enough money in his account to cover it, or he would not need the high-interest loan.

Complicating the situation is that a borrower's paycheck usually will not clear, if deposited, until a day or two after his payday loans are due. So a borrower faces likely bounced-check fees from both his bank and the payday lender if the post-dated check he used as security is actually deposited. So, most borrowers try to pay off or extend payday loans in cash first.

High costs

The Deseret Morning News contacted 307 payday loan stores and online lenders that are licensed, operating or advertising in Utah to ask what their rates would be on a $100 loan for two weeks.