Payday lender suits swamp Utah small claims courts

Copyright 2010, Deseret News

This is a corrected version of the story. The original included some data from the company, Checknet which is a collections company and not a payday lender.

Payday lenders sued more than 11,000 Utahns in small-claims courts during 2009. That's the equivalent of suing every man, woman and child in Emery County.

That happened even though payday lenders tell the Legislature every year — as they seek to avoid tough restrictions pushed constantly by critics — that almost all borrowers pay off their 500-percent-or-so, short-term loans on time and can afford them.

But computer-assisted analysis of court records by the Deseret News shows that payday lender suits are swamping some small-claims courts.

In fact, about half of all small-claims cases last year along the urban Wasatch Front were filed by payday lenders. And in the Provo District — where the large Check City payday loan company has its headquarters — a whopping 81 percent of all cases were filed by such lenders.

"Maybe we shouldn't call them small-claims courts anymore. Maybe we should call them payday lender courts," said University of Utah law professor Christopher Peterson, who has written a book on predatory lending and testified at the Legislature about payday lenders. "It makes me wonder whether their cases are getting sufficient scrutiny."

Frank Pignanelli, lobbyist and spokesman for the Utah Consumer Lending Alliance, which represents most larger payday lenders, said the group figures that it makes more than 1 million payday loans a year in Utah, so the lawsuits filed represent only 1 percent or so of all its loans.

He said that shows most borrowers can afford the loans, and that few go to default.

The problem is, according to Linda Hilton, director of the Coalition of Religious Communities and a longtime critic of payday loans, is "we have to take payday lenders' word about how many loans they make in Utah." If they actually make fewer loans than the million they claim, "the percentage of problem loans represented by the lawsuits could be much higher."

So Rep. Laura Black, D-Salt Lake, is pushing a bill at the Legislature that would require payday lenders to disclose how many loans they make a year and their overall value. "I think they skew their statistics to say whatever they want us to hear, so it doesn't look as bad as it really is for the consumer," she said.