Critics say such data show the loans are "debt traps" that easily snare the unwary and again are pushing for reform in the upcoming Legislature. But the payday loan industry says, because of changes in recent years, borrowers generally are well served, protected and satisfied.
Most payday loans are for two weeks, or until a borrower's next payday. Utah law allows renewing them for up to 10 weeks, after which no more interest may be charged. But critics say the poor are often pressured to take out new loans to avoid legal action and fees over a default on the original, leading to spiraling debt.
New state data say the average payday loan in Utah is for $324 and takes 32 days to pay.
The state says 51 payday loan companies, 69 title loan firms (offering high interest rates on loans secured by cars) and 28 internet payday loan firms are registered in the state.
They have 553 physical stores in Utah — exceeding the number of Subway, McDonald's, Burger King and Wendy's restaurants in the state combined.
Debt traps? • "Of course [payday loans] are debt traps. That's why so many people default," said Bill Tibbitts, president of the Coalition of Religious Communities, which has long contended the loans target the poor who cannot afford them.
"A normal loan company makes its money when people pay back loans," he said. "Payday lenders make their money when people don't pay on time" and extend payments at ultra-high interest or take out new loans to pay off old ones.
Tibbitts called 459 percent interest "ridiculous," adding, "People complain about having a credit card with 15, 20 or 25 percent interest. Multiply that by about 20, and you have what payday loans charge."
Wendy Gibson, spokeswoman for the industry's Utah Consumer Lending Association, disagrees — and says state-required posting of annual interest rates is a misleading measure for payday loans that may charge interest for only up to 10 weeks under state law.
"An annual percentage rate of 459.14 percent equates to a fee of $8.81 for a $100 loan for one week," she said. "Payday loans give borrowers far better, less expensive options than overdrafts, returned check charges and utility disconnect/reconnect fees."
People with poor credit often cannot obtain loans in emergencies from banks or credit unions, Gibson said. So using payday lenders actually saves "money over more expensive alternatives while having access to much-needed credit."
Varying rates • So why do some payday lenders charge up to 1,408 APR, and some charge as little as zero percent?
"Some lenders charge a flat fee regardless of loan duration, which result in an APR that varies and is sometimes higher than the average rate" if borrowers pay them off early, Gibson said. Some loans are offered at zero percent interest in promotions, so she urges borrowers to shop around for deals.