The Utah Legislative Session is up and running and the bills are passing. One of the bills of interest to me is HB127. This bill is designed to reform many of the practices of Payday loan companies. Today it sailed through the House Business and Labor Committee by a vote of 12-0.
Why is this of interest to bankruptcy attorneys you ask? Just the other day I was talking to an individual who was telling me about her debts and she proceeded to list off seven payday loan companies that she hadn’t repaid. What I see happening are people obtaining payday loans in desperation to pay off debt hoping to be able to pay off the payday loan in a couple of weeks only to realize that they don’t have the money. Seeing that big interest is going to hit (the average interest being 474% for payday loans) they decide to get another payday loan to pay off the previous loan which then cannot be repaid. The cycle repeats itself. Wash, rinse, repeat. Soon they find themselves in a financial avalanche that they will never recover from.
Here are some of the more important provisions of the bill:
-Payday loans, usually for two weeks, currently can be renewed or “rolled over” for up to 10 weeks, after which no more interest may be paid. The bill would then give borrowers 60 days to pay off the loan before lenders could take any action against them.
-The bill would require lenders to file any default lawsuits where borrowers live or obtained the loan. Many lenders now make borrowers waive that right, and lenders do such things as sue people living in St. George in an Orem court — making cases difficult to defend.
-The bill would require lenders to do at least minimal checking to see if borrowers can afford the loans and rollovers, including looking at pay stubs, doing a credit check or looking at repayment history of previous loans.
-The bill would require the industry to report to the state how many loans go the full 10 weeks, how many end up in default, and the amounts involved. Advocates now claim that default rates are high while the industry claims it is low, and the data should show what is true.
What do you think? Is more regulation of payday loans good policy?
Sean Wood 