Herald Poll: Curb payday predators

It's way past time for Utah to rein in "payday" loans, which prey on those least able to defend themselves. A year ago we urged passage of a 36 percent interest cap on such loans, but it hasn't been enacted yet.

Last year we said that was loan shark territory. We stand corrected: we have since heard that back in the Mafia's heyday underworld loan sharks charged only 250 percent.

It is astonishing that almost nothing in Utah law curbs this outrageous practice. Years ago lawmakers ended the ban on usury and opened the door to sky-high interest rates. Last year the Legislature passed a minor reform authorizing fines against lenders who fail to register or otherwise violate the few regulations the state imposes.

A bill to take stronger action -- limiting the number of loans allowable to a person at a single outlet, capping the loan total and banning other outlandish practices -- died in committee.

Sadly, the people most often hurt by these practices are working people who have limited resources. They earn a paycheck, but a medical bill or car repair can put them under financial stress. Some of these folks may have a faulty understanding of economics, but if that were a crime, much of the staff of the New York Times and many members of Congress would be in jail, so we don't see why ordinary working Utahns should suffer. Besides, it is the naive who are most in need of protection from abuse.

We should avoid stereotyping those victimized by payday loan services, however. The AARP reports, for instance, that senior citizens who are still working sometimes are taken in by the sales pitches of the lenders -- of which there are many in Utah. There are so many dotting the state landscape, in fact, that one might assume they are benign. Reportedly, the state is home to well over 400 payday lending outlets -- more than the number of 7-Eleven, McDonald's, Burger King and Wendy's outlets combined.

Utah County has at least its share. State figures say there are about three dozen total in Provo and Orem, and more in other towns in the county.

Critics say harsh lending practices drive people into debt and bankruptcy. Consider one telling statistic that hints at the havoc the lenders create. Utah AARP asked court officials to find out how many collections cases in small claims court were brought by the more prominent payday lending firms. Of 17,600 collection cases studied, 7,521 had been brought by these large payday lending firms. One firm alone had 3,883 of the cases. Smaller firms undoubtedly have also ensnared people in collections cases.

Under criticism across the nation, the payday loan industry has mounted a $10 million public relations campaign. Defenders say the loan amounts are not excessive, considering the work involved; that the loans provide a needed service; and that the stores would go out of business if caps were imposed. Some legitimate bankers fear that a cap on the payday loans would lead to a cap on other loans.