Utah Lawmakers Reject Interest Rate Cap on Payday Loans

Measure voted down, 8-4

Rep. Laura Black sponsored the bill.

Much like neighboring state Arizona,  Utah lawmakers have rejected a bill that would have capped interest rates on payday loans.

The House Business and Labor Committee voted on the bill today. If it had passed, lenders would have been limited to charging a 100 percent annual interest rate on payday loans.

Payday loan primer

Payday loans are meant to be a short-term arrangement. Usually borrowers agree to repay the loans within two weeks. Payday lenders generally do not do credit checks, and thus the loans are considered high-risk for the lender.

Average rates in Utah

Currently, the average annual interest on a loan could be up to 250 percent, but that is only if the borrower defaults on a loan for a year. Upfront fees for payday loans are less than 15 percent, and those are the only fees collected if borrowers hold up their end of the agreement.

Defending the vote

Rep. Francis Gibson, R-Mapleton, sees the logic behind forgoing an interest rate cap. Similar caps in other states have driven payday lenders out of the state, reducing options for consumers.

Gibson points out that fees on payday loans often cost consumers less than the fees for bouncing a check. He said he is concerned about what would happen to people without credit if payday loans disappeared. ... click here to read the rest of the article titled "Utah Lawmakers Reject Interest Rate Cap on Payday Loans"