One Utah

In spring of 2000, the Coalition of Religious Communities became the first public policy group in Utah to address the issue of payday lending. At the time, when we went looking for allies, we found AARP – which was glad to have another group take the lead. Today, CORC, AARP and a host of advocacy groups are working on the issue of payday lending.

Here’s the problem:

Utah’s banks are a powerful voice on Capitol Hill. The banks – which directly and indirectly fund and/or own many payday lenders – oppose any regulations on the banking industry. Utah has not usury laws. The banking industry has actively opposed attempts to regulate payday lenders.

When advocates proposed a cap at 521%, the banks opposed it. You read that right – a cap on interest rates at five hundred and twenty-one percent interest rates was opposed by Utah’s banks as an unreasonable intrusion on the industry. For those interested in the math, that works out to $10 interest on every hundred dollars borrowed each and every week.

Our situation in Utah is complicated by James Evans. Evans – former state senator and current chair of Salt Lake County Republican party – owns a chain of payday lenders. Evans’ voice receives far more credence than the voices of consumers. Evans argued – successfully – that there are a few “bad” payday lenders, but we should not punish a whole industry for a few bad eggs.

At the 2001 legislative session, there were 2 lobbyists working for the payday lenders. This year, there are at least 18. Payday lenders have opposed any regulation on the industry and have reluctantly accepted some minimal regulations – such as a 24 hour right of rescission. They of course oppose any caps on fees and interest rates. Ideologically, a majority of Utah legislators believe regulating industry is an illegitimate use of government power because interferes with the free market.

And, the Utah state Department of Financial Institutions remains completely inactive with regard to payday lenders. After filing complaints with the state, CORC has attempted to find out what, if any, actions were taken. Citing privacy, the DFI has refused to reveal anything to activists. There is no appeal process – meaning the records remain completely closed to citizen review. The head of the DFI is openly in favor of the payday lending industry.

In an environment where many politicians seem to believe that helping the poor is a waste of government resources, or that the poor are poor because they are lazy, regulating an industry that preys on the poor isn’t a priority. It’s not uncommon to hear the industry’s predatory practices justified, defended, and even lauded as a way of keeping consumers in line and making them pay the price for their lack of financial self-discipline. And when the regulatory agency in charge of the industry openly favors the industry, it’s difficult to really make a difference.

Last but not least, a legislator who has normally taken the lead in social justice issues has become less effective on this issue. Ed Mayne a normally strong voice in favor of the working poor, has become less and less outspoken, but continues to run toothless bills in the legislature. Rumor has it that Sen. Mayne is receiving sizable contributions from the payday lenders PAC. If so, it’s a sad commentary on the corrupting influence of money on politics.

There’s some good news – more and more Republican legislators are seeing payday lenders appear in their districts like a fungus, are hearing stories from their constituents, and are interested in regulating the industry. And the military establishment wants the payday lending industry regulated. At the national level, the law now caps the interest active members of the military can be charged.

At the state level, there are several legislators who have expressed some interest in regulating the industry, but as far as I know, there are is only bill written at this point.

This entry was posted Monday, October 23rd, 2006 at 7:36 am and is filed under Economy, Political Corruption, Republicans, This Blog. You can leave a response, or trackback from your own site.