Deseret News | Payday lenders protest potential rate cap

Reader comments
Payday lenders protest potential rate cap

JBM | 5:37 p.m. Oct. 23, 2009

No one forces people to go into these locations to get loans. Interest rates are posted for all to see (and then leave if they wish without a loan). Government can regulate this business until it is gone, then it will simply go underground / black market because demand will remain. These lenders take substantial risks and usually for a short time. They don't make loans for a year, so the annual rate is somewhat misleading. Overall, get government out of trying to regulate profit without accounting for the associated risks (in this and any industy). Even studies by the NY Fed validate the claims made by this Gibson person.

Observer | 10:23 p.m. Oct. 23, 2009

These companies prey on the poor and desperate individuals who have nowhere else to turn. They're REAL NICE when you're borrowing money, but if you can't make the payment, you're off to court with an even bigger payment.

If you can't make money loaning $ at 100% interest, then you SHOULD be put out of business!

Ted | 10:24 p.m. Oct. 23, 2009

AGREED!

Comments continue below

Loansharking | 10:35 p.m. Oct. 23, 2009

used to be illegal. A new name makes it acceptable? I think not. Stiff regulation is needed.

Anonymous | 11:16 p.m. Oct. 23, 2009

I agree about the loan sharking but unfortunately the banks have some responsibility too. I have never had a bank fee in my life but if you convert those fees to interest they are off the charts. If banks were a little less greedy there wouldn't be nearly as many payday stores. The banks are really not as different as you might think.

Misleading | 11:25 p.m. Oct. 23, 2009

To "Observer". Would you loan a relatively unknown person $100 for a week for only $1.92, because that's the proposed 100% annual interest.

You say the company is no longer nice when you can't pay back the loan you AGREED to pay back.

How about we try personal responsibility for a change instead of regulation. Don't take out a loan you can't pay back. Don't buy a house you can't afford. Don't live beyond your means. If you do, word to the wise, it's YOUR fault, not the fault of whoever gave you the money. Maybe if we as a society could learn that little lesson we wouldn't be having the economic pain we are now.

Predatory and misleading lending practices are in a different boat - they should be stopped and prosecuted. But a (legal) payday loan is clearly defined what your obligations are.

Payday lenders not nice. | 4:14 a.m. Oct. 24, 2009

A loanshark off the street is cheaper to borrow from than these payday lenders. They prey on the poor and low income people because these same borrowers do not qualify for conventional bank loans.

Don't be fooled by their fee claims either. They do attach late fees, costs, and interest to any overdue payment.

Another means to control them is to force them out of the small claims courts and use the civil courts to try and recoup losses from bad loans. Payday loans and lenders are a very high risk business that works outside of financial laws of lending. They need to be included as a lending institution just as banks and credit unions. Their court claims assume the posture and rights of bank lending so they should be included in bank lending laws.

Payday lenders perpetrated and enticed borrowers in to this risk game so they should also bear the burden of responsible lending.

I do have to agree with capping banks, mortgage, and credit card fees as they border on criminal that is used as an incentive to swindle and cheat consumers too. Especially when they start lumping many fees for a single late payment.

misleading | 6:38 a.m. Oct. 24, 2009

I have never used payday loan because I know better. I agreed that yearly interest rate is mis-leading. Businesses should be allowed to make money for their services but lawmakers must look at this issue in context, not some yearly percentrate that make no sense.

MFW | 7:03 a.m. Oct. 24, 2009

Arkansas got rid of the payday lender over a period of about one year. It can be done if there is the will to do it.

Jean | 7:09 a.m. Oct. 24, 2009

I keep wondering how the micro-lending and micro-financing that work in the third world could be applied to this situation.

New Mexico | 7:50 a.m. Oct. 24, 2009

More personal regulation and less regulation handed down by the government is what is called for here.

Anonymous | 8:17 a.m. Oct. 24, 2009

These lenders are predators and are on the fringe of business society. However, I am getting sick and tired of us bringing government into everything in our lives. We are giving away our freedom and liberty. Regulation of pay day lenders won't affect me or my business in any way, regulations related to this may affect me in the future and I will then be powerless. Any legislation that affects one business may affect another in the future.

Anon | 8:41 a.m. Oct. 24, 2009

To "Misleading"...don't mislead others with your poor math...If you read the article, Payday loans can charge only charge interest for 12 weeks so on $100 that would be $8.50 per week which is much more than $1.92 per week. At a $1.92 per week on $100 dollars for 52 weeks would be 100% for the year, Payday Loan companies would be out of business. The article talked about getting a 100% return in 8 weeks and that would equate to 650% interest. Basic math classes may help you.

Leeches?-To A Degree Yes | 8:49 a.m. Oct. 24, 2009

Pay day loans are really no different than the so-called regulated banking industry! You could put them all in sack and shake it, then draw a few out and you wouldn't know the difference between them. Thieves, liars, cheats that all claim to provide a service for we the citizen. What a laugh. Just study the BIG banking systems, then filter on down to these weasels in the pawn shops and pay day loan businesses. There isn't a nickels worth of difference in how they operate! Re-regulate all of them! NOW.

Why is selling drugs | 8:53 a.m. Oct. 24, 2009

illegal???

No one forces you to buy the drugs.

How about a little personal responsibility? Let's legalize the selling of drugs.

Charles | 9:18 a.m. Oct. 24, 2009

The Salt Lake City Council is being too kind to these thieves. What they should have done is put them completely out of business. What they are doing amounts to illegal usury. Get rid of their stench from out state and maybe people can really start to manage their money in a productive way.

Anonymous | 9:38 a.m. Oct. 24, 2009

Most Utah advocate Utah government protecting citizens from gambling. Then you are against the government protections against loan sharks. What your moral compass here? How do you decide? Gambling is a business like loan sharking. Both take money from uneducated poor people that would be put to better use paying rent or buying food for the kids. Both create crime when people loose too much money. Why are the groups in Utah that are against gaming makes a stand against usury? There is even a biblical prohibition on usury. The Bible evolved about usury, but not gays?

Anonymous | 9:51 a.m. Oct. 24, 2009

417% interest! What kind of moron would agree to those types of loan terms? My personal cap is 5%.

Anonymous | 9:57 a.m. Oct. 24, 2009

What the difference between these swindlers, and the rest of Corporate banking?

[nothing]

Anonymous | 10:19 a.m. Oct. 24, 2009

These loans prey on people on Social Security. Some of these lenders have found ways to seize Social Security checks as well.
Payday lenders are clogging up the small claims system. They polute neighborhoods with too many Payday loan shops. They must be regulated!
Next, do something about the out of control credit card lenders that are raising rates to out of control heights.
These loans are ruining our economy and our prospect of a financially secure America!

Wondering | 10:26 a.m. Oct. 24, 2009

Why do the owners of these businesses send an employee to represent them? Why don't the owners speak up on behalf of themselves?

Loan Sharks | 10:59 a.m. Oct. 24, 2009

Back in the day, the 1970's, we had usury laws in Utah and much of the United States. These laws usually limited interest to about 20 percent. Beyond that you had to deal with the loan sharks in back allies and under the cover of darkness.

During the late 70's the country was suffering from bout of extreme inflation. In some cases long term secured conventional loans were near 15 percent. Credit cards and others were finding it difficult to make their profit unless they charged above the 20-24 legal limit, and so usury laws were removed.

By removing the usury laws, the back ally loan sharks were able to move out of the dark allies into store fronts called "Pay Day Lenders." Now instead of breaking your fingers for non-payment, they use courts. The same for other lenders like banks and credit cards that charge usury interest and high fees.

Savers are getting less than 2 percent on savings while the banks and other lenders turn around and loan it out for, 100% or more as mentioned here. The government is suppose to protect us from corruption, not make it legal!

Reason | 11:00 a.m. Oct. 24, 2009

There is no doubt these Payday loans target the financially uninformed. "those who understand interest EARN it, those who don't PAY it." But instead of trying to legislate to protect the ignorant, let try first to educate them. You can cap these Payday loans if it seems like the popular thing to to, but you will not solve the problem of stupid people getting deeeeeep into debt. Just ask the U.S. Congress.

Misleading V2 | 1:18 p.m. Oct. 24, 2009

To "Anon"
Who called into question my math skills saying that my $1.92 number was wrong and that no business could stay in business with that rate. Well - I question your reading skills. Read the article:

"Councilwoman Jani Iwamoto crafted a proposal that asks lawmakers to consider a cap of 100 percent ANNUAL interest on loans issued by payday lenders."

That's the proposal.

Yes - they are CURRENTLY doing short term loans of 400%+ annually, which equates to $5 - $10 per week on a loan of $100. Which is high, but necessary to stay in business. But you cannot compare these short term loans to high risk candidates in even the same terminology as a 30 year loan to a highly documented, secured home loan.

This is exactly why I'm saying this article and the way people are talking about this is misleading. They can only charge interest for 12 weeks, so they will never realize the 400% interest gain. Over the life of the loan, they will be earning less than 100% interest over the 12 weeks. If you want to mislead, compare that to the interest over the life of your home loan - 300%+

Anonymous | 2:06 p.m. Oct. 24, 2009

Why do these loansharks need to charge this much interest to stay in business???? This is outrageous. The state needs to further regulate them!

RW | 4:48 p.m. Oct. 24, 2009

These guys can't afford their campaign contributions to Shurtleff if they cannot practice usery. There is a reason that the Bible bans this practice.

bad idea. | 5:58 p.m. Oct. 24, 2009

We are going to regulate ourselves out of freedom. we need to keep the privet business in one area and the gov. in it's own area. lets dont mix it together. if pay day loans are such a bad thing, then they should go out of business on their own.

The Pay Day Loan Industry | 9:57 p.m. Oct. 24, 2009

is a poor excuse for a real buisness. It is more akin to a parasitical entity. I say regulate them out of business as to me they are a joke along with other poor excuses for "business" such as mortgage brokers, real estate agents and others who deem and scheem to make make money via transaction costs instead of producing something of real worth (tangible)to society. Let these parasites go out of business. We will all be better off (certainly those who unwisly use their services will be).

Forget It | 11:11 p.m. Oct. 24, 2009

I agree that something needs to be done to slow down these "legal" loan sharks, but you can forget the Legislature taking any action that might be helpful.

The big banks and their big lobbists will see to that.

And the reason they will see to is it is, as several have pointed out above, because there is not a dime's worth of difference between what the banks do and what these loan sharks do.

Jon Schultz | 5:28 p.m. Oct. 25, 2009

The crusade against payday lending is a complete and total witch hunt. Payday loans are an honest and clearly presented service which helps many people, in some cases saving lives. Looking at the annual percentage rate is extremely misleading, as the significance of the APR is inversely proportional to the amount and term of a loan. For a payday loan - the only type of loan many people can qualify for - the lender only receives interest on a small amount of money for a short period of time and therefore MUST charge a relatively high APR just to cover costs and break even on the transaction. Even the NONPROFIT payday loan offered as a charity by Goodwill Industries charges a 252% APR.

Sure, some people overborrow and get themselves into a bind, but that is the case with all kinds of loans and is no more the fault of the lender than ice cream dealers are to blame for the obesity of those people who eat too much of their product. Should the government place a cap on the amount of fat and sugar allowed in ice cream because some people need to learn self-control?

UtahVault | 1:44 p.m. Oct. 26, 2009

I love all the folks that "know" all about payday lending or high cost loans. NOTHING, and I mean NOTHING prevents banks or credit unions from offering 100% or even 36% rate 2 week loans to us. Why don't they? If its so profitable as all you anti-choice ranters are saying. Simple answer you morons, they can't make any money. SO the answer is people should not be allowed to get ANY short term loans, or they should. In this case, the MARKET is deciding that it is HIGH cost because of the risk. BUt what does that matter because the same people that are ranting about payday lending are the ones that want the government in control of every other aspect of our lives. It is very interesting that the 94% of people that Don't use payday products sit in judgement of the 6% that do and don't have any problem with it. Hey you anti's, why don't you donate all your money to set up a non-profit and "give" away your money at 100% if its so great? Oh yeah, thats what the FDIC mandated for banks - NOT WORKING

Common Sense | 1:54 p.m. Oct. 26, 2009

After reading the astroturf comments here from concerned citizen's it looks like Utah's own socialist version of ACORN (i.e. The Coalition of Religious Communities) is alive and well. The bottom line here is if a person feels that an APR of 400% is too high for a two week loan, they should set up their own lending operation and give out $300 loans for two week and only charge an APR of 36%. Since that is not happening, it seems to me that payday lenders are competing and offering a service at a reasonable price.

Hey Pig | 2:49 p.m. Oct. 26, 2009

Frank Pinanelli (Pig for short): Aren't you Dems all for the little people? How can you take bribes from the predators in payday lending and call yourself "for the people"? Pointing at banks and shouting "they do it too" is pretty weak. Grow a backbone, send back the "consultant fees", and lobby to shut down these rip-off joints. That would really be doing something for the people...... and a good example for Republicans as well.

PaydayLendingRep | 2:54 p.m. Oct. 29, 2009

Goodwill, a non-profit, tax-exempt charity, charges customers almost $10 per $100 borrowed (i.e., 252% APR) for their “Good Money” payday loan. Even though they are only trying to break even, the Goodwill could not offer the product under a 36% rate cap. For-profit payday lenders typically charge $15 per $100 borrowed while also paying taxes, employee salaries and health care, rent and overhead costs. The $5 more they need to break even, pay taxes, make a profit and keep their businesses running makes sense for borrowers, employees and the tax coffers.
The real-world examples are proof of the consequences of overly restrictive annual rate caps. Hundreds of stores have closed, thousands of employees have lost their jobs and hundreds of thousands of consumers are left to choose among less desirable credit options.
Eliminating payday loans as an option does not eliminate the need for short-term credit. Instead it forces consumers to choose between more expensive alternatives such as fees for bounced checks, overdraft protection, or late bill payments or even unregulated off-shore Internet lenders.

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