Payday lending reform bill HB127 passed the Utah House Monday on a 69-4 vote and has moved to the Senate. The measure is sponsored by Rep. Jim Dunnigan (R-Taylorsville).
Momentum for the bill built up in the wake of a scandal surrounding former Attorney General John Swallow. In exchange for big donations from payday lenders, Swallow was found to have funneled money to help payday lenders defeat former Rep. Brad Daw (R-Orem) for sponsoring reform legislation. The payday industry also gave Swallow large donations that he put toward defeating his primary election opponent, Sean Reyes.
Payday loans in Utah currently charge an average 474 percent annual interest, usually for two weeks. These loans can be renewed for up to 10 weeks, after which no more interest can be collected. Threats of collection or lawsuits, however, may lead borrowers to take out more payday loans from other lenders to pay off earlier ones.
HB127 would give borrowers 60 days after the 10-week limit to pay off their debt without any further action by lenders. Lenders also would be required to file any default lawsuits where borrowers live or obtained the loan. This will make cases easier for borrowers to defend. Lenders also must do at least minimal checking to see if borrowers can afford the loans and rollovers. This may include an examination of pay stubs or doing a credit check. Payday lenders also must report to the state how many loans go the full 10 weeks, how many end up in default, and how much money is involved in these loans.