Linda Hilton, director of the Coalition of Religious Communities, called a news conference to try to pressure the Salt Lake City-based bank to explain a financial arrangement between its leasing subsidiary and Check City Partnership, a payday-loan business that charges annual interest rates of 400 percent or more.
The arrangement with Check City, said Zions Executive Vice President George Hofmann, involves leasing office furniture and equipment totaling less than $100,000.
"We certainly don't condone charging interest in the triple digits," said Hofmann. "We would generally agree that loan rates that high are in the egregious zone and something we'd probably love to see handled on a regulatory basis by the Utah Legislature."
Utah has no anti-usury laws. When a bill limiting interest rates was introduced two years ago, the banking industry, including Zions, opposed the legislation. Credit unions supported the failed measure.
Hilton, whose nonprofit group advocates social change, spoke near the intersection of 5400 South and Redwood Road, where a Check City outlet and a Zions branch are on opposite sides of the street. She said she went to the media after Zions refused to discuss its financial involvement with the quick-cash store.
Check City is "a loan shark," said Hilton, that preys on Utahns and those in the military by charging more than the 100 percent return mob boss Al Capone demanded. She pointed to the 2007 Defense Authorization Bill that would put a 36 percent annual rate cap on quick-cash lending businesses.
"The 36 percent cap is more than 10 times less than what lenders are charging," she said, "with rates in Utah" at payday loan operations "ranging from about 440 percent to over 1,000 percent."
Cort Walker, Check City's government relations director, said the $8 his company charges for a $100 loan to be repaid in a week is significantly cheaper than the $53 others charge for a bounced check. The average loan his business extends to customers is about $375 for 13 days, he added. The annual percentage rate on that amount is 417 percent.
"We've been in the business for 20 years," said Walker, pointing to 50 outlets in Utah and four other states. "People love us and they use our services responsibly."
A recent Pentagon report said that quick-cash loans are weakening the U.S. military by damaging morale and threatening soldiers' security clearances. The report noted that payday lenders often operate outlets near military bases. Hilton's group displayed a map showing quick-cash lending stores dotting the area around Hill Air Force Base in northern Utah.
The Defense Department's report said an estimated 225,000, or 17 percent, of military personnel get caught in the payday-loan trap. During the past five years, security clearances for U.S. sailors and Marines have increasingly been denied as their financial problems have increased by 1,600 percent.
Although the Pentagon report detailed education and military relief programs that could be put in place, the report noted the military "cannot prevent predatory lending without assistance from Congress, the state Legislatures and federal and state enforcement agencies."
dawn@sltrib.com
* Placing a 36 percent cap on annual interest rates made to military borrowers.
* Stopping loans made without consideration of soldiers' ability to pay.
* No military personnel waiving their legal rights to go to court.
* Prohibiting loans to soldiers secured by personal checks or car titles.
* No setting aside financial protections in the 1940 Servicemembers Civil Relief Act.
