Rate cap bill introduced in Utah
February 15, 2009 | Deseret News, Utah | Comments (0)From the Deseret News:
Does a cap of 100 percent annual interest on loans sound high? Payday lenders argue it would be too low for them to make enough money to stay in business.
But Rep. Laura Black, D-Sandy, is pushing such a limit anyway, saying she has seen too many people trapped and financially drained by high-rate payday loans. A 2005 Deseret News survey showed they charge a median 521 percent annual interest in Utah — five times more than the limit she seeks — or $20 for a two-week loan of $100.
The payday loan industry’s Utah Consumer Lending Alliance says competition has driven down the cost of such a loan recently to about $15 for a two-week loan of $100. It says such a loan costs $13.95 to generate. But the proposed 100 percent interest rate cap would allow charging only $3.60 for such a loan.
“You can’t spend $13.95 on a loan and sell it for $3.60 any more than you can spend 30 cents to make a cheeseburger and sell it for a nickle,” a written statement from the industry group said. Its lobbyist, Frank Pignanelli, added, “It would force the industry out of business here.”
The bottom line is that annual percentage rates shouldn’t even be applied to a two-week loan.
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