Utah legislators consider action on payday lenders

After lengthy testimony Wednesday about the payday lending industry and its supposed advantages and disadvantages for Utahns, a legislative committee was left wondering just how much interest it should pay to the topic.

The Business and Labor Interim Committee heard several speakers say the industry needs more regulation to prevent gouging of financially strapped Utahns, but it also heard industry representatives say customer complaints do not warrant more legislation.

While an exact number of such loans has proven elusive — Rep. Phil Riesen, D-Salt Lake, said $452 million a year is loaned to Utahns — the state Department of Financial Institutions in 2006 received only 39 complaints about payday lenders, down from 52 the previous year. Of the 39, 32 were about Internet-based lenders, including 27 from nonresidents.

The state has 168 payday lenders with a total of 354 locations. Seventy-nine are Internet-based, of which 27 are based in Utah.

Rep. Lou Shurtliff, D-Ogden, is pushing a bill that would limit loans to $500, give borrowers 30 days to repay them and collect data to better determine the industry's effects, including the impact on people "caught up in the web that they can't escape."

"There are people that are struggling because of payday loans," she said, noting that payday lender locations are not in more-affluent neighborhoods. "Truth is, many of our citizens are being hurt by payday loans."

She suggested the low complaint statistics may be due to customers' embarrassment about their situations.

Riesen noted that Utah has more payday lender locations than all 7-Eleven, Subway, McDonald's and Burger King sites combined. He wants more oversight of the industry.

"Payday lenders are taking unfair advantage — some say unconscionable advantage — of those in real need," Riesen said.

Wendy Gibson, spokeswoman for the Utah Consumer Lending Association, said the association supports education for consumers, but studies indicate payday lenders are an important and less-expensive option for consumers needing money. She suggested holding off on more legislation until determining if the most recently passed law is effective.

Gibson and Kip Cashmore, vice president of the association, said the market is working.

"I really don't know what problem we're trying to take care of, with 30 complaints," Cashmore said.