By Madeleine Lewis and Michael A. Kruse
Capital West News
SALT LAKE CITY – A bill to restrict payday loans died in Utah legislative committee this week after members voted down moving the bill to the House floor by a 6-3 vote.
The bill sponsored by Rep. Bradley M. Daw, R-Orem would of regulated payday lenders.
Daw said the bill is probably dead for this year as he finds it unlikely the committee will bring back it up. Daw said he will retool and gather more information about those who fall into the payday loan trap.
“I have a whole year to gather information and find another 14,000 court cases” Daw said. Referencing his data that 14,000 people have been taken to court by payday lenders in the last year.
The bill had two primary objectives: the first is to establish a database to track who is taking out payday loans and how much they are worth. The second is to determine a cap on the number of loans or the or monetary amount of loans one individual can have at any one time.
“The whole idea is to keep them from getting loan after loan after loan after loan and getting deeper and deeper in debt,” said Art Sutherland, a citizen lobbyist with the Coalition of Religious Committees. The group is made of people from various religious backgrounds who fight against poverty.
“The problem is,these loans go up to a 400 percent interest rate. . .They are preying on the people that are low income and can’t get loans — maybe they don’t have checking or banking account,” said Linda Binkley, member of the coalition and the Soroptimist International of Ogden.
High interest rates are a point of concern, but Daw said they are hard to regulate because banks and other monetary institutions say capping interest rates inhibits their “business models.”
“This database it the middle ground between doing nothing or very little, and just kind of shutting down the business entirely,” Daw said. “If somebody is already two loans in—an average loan is about $350 — if they really need a third loan, they have problems well beyond what we’re going to solve with another paycheck loan,”
According to Daw, these loans are easy to get stuck in because they must be paid off in one fell swoop.
“That’s the magic of the trap,” Daw said. “That is the teeth in the trap…they say ‘sorry we only take the full amount.’ So you either do that, or role it over.”
He said that these types of situations invariably lead to bankruptcy or a court judgment.
On the payday lender’s side, Binkley said it prevents them from wasting time and resources “sending bad money after good.”
Michael Brown of the Consumer Lending Association, said they already databases in place to check someone’s abilty to pay the loan back.
“It’s our money that same we lend out we want it back.” Brown said “What company would loan to someone without researching them”
Daw countered by saying payday loans companies don’t all subscribe to the same database, and some don’t even subscribe at all. He said setting up a state database would struck the balance between people who need emergency funds and lenders who take advantage of people in desperate situations.
Daw said these lenders actually profit from bad investments. If the loans don’t get paid off, the payday lenders almost always win the judgment and get garnishments.
“This is a good thing that’s being proposed; it’s a secure,” Sutherland said. “The state is the only organization that will have the information. They are the only one that says whether the person is eligible or ineligible.”
The last time Daw sponsored a similar bill three years ago, it didn’t get far. Daw then lost reelection.
According to Sutherland, payday lenders “funneled a lot of money to his opponent in caucus and primary, and she won the nomination, which is tantamount to winning the election. . .He was out of the seat, but now he is back.”
“The payday loaners put together a dummy corporation,” Daw said. “They laundered payday money through that and used it to run a very vicious smear campaign that got me out of office. Then it all came out in the [former attorney general John Swallow] hearings and investigation so I got back into office. ”