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Perhaps a symbol that a loan practice is actually predatory is when even the state’s payday loan industry — often criticized for charging quite 500% annual interest — opposes it.
That happened on Tuesday when payday lenders supported a bill that seeks to prevent one high-interest lender in Utah that found how to jail some borrowers who default loans, then seize their bail money.
“That isn't a practice we accept as true with,” Wendy Gibson, spokeswoman for the payday loan industry’s Utah Consumer Lending Association, told the House Business and Labor Committee on Tuesday.
The committee agreed and voted 11-0 to advance HB319 to ban that practice to the complete House for consideration.
Rep. Brad Daw — who for years has battled high-interest lenders in Utah — says he was flabbergasted when he examines the newest practice, and introduced the bill to halt it.
ProPublica last year reported how Utah Payday Loans for fewer as well as auto title and installment loans offered at triple-digit annual interest rates are obtained warrants against people it had been suing for nonpayment of loans.
The borrowers technically were jailed for not responding to a court summons requested by the lender, since it's against the law to jail someone due to unpaid debt and Congress has banned debtors prisons since 1833.
Still, constables appeared and threatened arrest if people couldn't come up with many dollars in bail. ProPublica found a minimum of 17 cases during which Utahns had, in fact, been jailed — anywhere from a few of hours to a couple of days.
In 2014, state legislators passed a law that made it possible for creditors to urge access to bail money posted in civil cases.
Daw’s bill would repeal that. The new bill also proposes other changes in laws that regulate high-interest lenders.
Daw said one would close a loophole that some payday lenders use to avoid a requirement that they stop charging interest on their loans after 10 weeks, and to supply a no-interest extended repayment plan. They evade that by offering signature loans instead. Daw also wants to elongate from 10 days to 30 days a required window between notifying borrowers and taking them to court.
Finally, the bill would require the state to gather far more data annually about payday and other high-interest lenders. that has what percentage loans that payday lenders make, the entire dollar amount loaned, the amount of borrowers who extended loans and therefore the percentage of loans that aren't repaid.
Gibson, with the payday loan industry, said, “We’ve been working hard with Representative Daw since November to develop legislation to unravel real and potential problems by providing additional consumer safeguards.” She praised the resulting bill.