This is an archived article that was published on sltrib.com in 2006, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
The Salt Lake County Council's attempt to restrict so-called payday lenders to one shop per 15,000 people has some merit in addressing the public-safety issues connected with such businesses.
But it's largely just a way to show the council's dislike for predatory lending companies that charge desperate customers an annual interest rate as much as 500 percent, and sometimes more, because there is little else the council can do.
The county government's hands are tied by the Legislature's refusal to get tough with such businesses and put a cap on the interest rates they can charge. Utah has no limits whatever on usury, a fact likely due to the business-friendly, predominantly Republican lawmakers on Capitol Hill.
Typically, in a payday loan transaction, a borrower writes a check dated a week or two in the future when she expects to have the money to cover it, and the amount includes interest, sometimes in the triple digits. If it can't be covered on time, the interest may go even higher.
Payday lenders prey on people who are short of cash because of emergencies or poor budgeting, and too often facilitate drug deals by providing the cash buyers immediately need. The customers involved in the latter exchange tend to congregate around the lending business and can threaten the safety of people who live or work in the same neighborhood.
Limiting the number of payday lenders in a specific area may help deal with that problem, but does little to address the real issue -- that legal loan-sharks target those least able to pay and put them on a long road of financial servitude.
At the request of the Pentagon, Congress recently passed a provision in the defense authorization bill that imposes a 36 percent annual rate cap on payday loans to servicemen and women beginning Oct. 1, 2007.
The Pentagon reported to Congress that 17 percent of the military, many of them 18 or 19 years old, use payday loans. The report said such "predatory lending" hurts morale and "undermines military readiness."
An interest-rate cap is justified to protect those serving in the military, and it is just as important to protect vulnerable civilians, including Utahns.