The Deseret News and KSL reported last week that a recent bill to cap payday loan rates was defeated by an 8-4 vote. The bill proposed a rate cap of 100 percent annual interest to all payday loans.
Rep. Laura Black, D-Salt Lake, was the one to sponsor the bill stating that too many people are unable to pay for high interest loans. Her main argument is that people take out loans, but are unable to pay them back (due to the high interest), so they take out more loans to pay for the original one, leading to more debt. Let’s remember that, on average, the interest for a $100 loan is $20. It’s hard to believe that a person who took out a loan for $100 is unable to pay the interest of $20. Payday loan companies work with the borrower and allow for monthly payments. Saying that payday loans make borrowers go into more and more debt is ridiculous.
Payday loan consumers are told in advance what the interest will be. The guidelines of the loan is presented to them and explanations are given. The consumer is able to make an educated decision, based on their circumstance to either take out a payday loan or not.
In many cases,payday loans charge less compared to fee for bounced checks. If payday loans were to be eliminated all together, it would be challenging for those without credit to get any kind of a loan. This bill to limit rates to 100% would put payday loan companies out of business. Luckily, the committee voted down the bill without much argument or debate. Most payday loan companies, including Check City, encourage customers to be responsible borrowers.
