Payday loans seem like a lifeline the first time you try them.
Pharmacy technician Marceen Shaughnessy had just filed for divorce and moved out. She used her rent money for a desk and computer table. To pay for her apartment that month, she went to a check-cashing business for a $500 infusion.
Then, her daughter plowed over a sign at their complex. A couple of fraudulent charges racked up overdraft fees in her bank account. Then, work transferred her to a pharmacy in Holladay and her gas bill ballooned as she commuted from Syracuse.
Two weeks later, her loan rolled over. Shaughnessy went to another payday lender to pay it off, then another to pay off that loan. Every bit of her $2,000 paycheck was spent shuffling debt. By the time she went to credit counseling and closed her checking account, she owed $8,000. Now, she plans to file for bankruptcy.
"It's huge -- $500 can turn into $1,600 in a heartbeat," she says.
Not much separates 1960s Mafia heavies and today's payday lenders: La Cosa Nostra charged its debtors 250 percent interest. Fifty years later, the check-cashing industry is even more ambitious. They charge up to 500 percent.
But while loan sharks are reviled, modern-day business-suited predatory lenders are treated like legitimate corporate citizens in Utah. This week, the Salt Lake City Council feebly -- and much too late -- attempted to curb the clustering of usury shops along city blocks. They say that's all they can do.
And that's just how lawmakers want it.
Egged on by bankers in their ranks and in Capitol hallways, every year legislators block attempts to cap payday loan interest rates. Salt Lake County Republican Party Chairman James Evans makes a living at check-cashing. Two-time GOP congressional candidate and former legislator John Swallow works as legal counsel for Check City.
Two years ago, Utah Attorney General Mark Shurtleff flew to the Bahamas to speak at a lenders convention. While other states' top lawyers have cracked down, he defends check-cashing. And last year, Shurtleff accepted $52,000 in campaign donations from the industry.
In this state, there is no shame in protecting money changers.
Rather than questioning the deceptive business practices of payday lenders (TV testimonials recommend using payday lending to make the mortgage) or their outrageous interest rates, Utah legislators blame naive consumers. They're dedicated to protecting the masses from the evils of gambling and drinking, but figure we're on our own when it comes to predatory lending.
"These folks are not credit-qualified. [Payday lenders] are taking a huge amount of risk," Spanish Fork Republican Rep. Mike Morley said before a House committee killed the latest payday lending bill this year. "This is a market system. It's working."
The Coalition of Religious Communities continues to prod legislators to see this as a moral issue -- as in Jesus and the money changers, or The Book of Mormon 's critique of those who take advantage of workers. But The Church of Jesus Christ of Latter-day Saints has declined to participate.
Christopher Peterson, University of Utah consumer finance law professor, found a counterintuitive correlation between the religiosity of the state and its payday lender saturation in a study released last year. Utah ranks ninth.
"Payday lending creates a feedback loop. It decreases the total number of people who have access to bank accounts and increases the number of people who declare bankruptcy," he says. "It's a mechanism that is supposed to help those in poverty that only creates more poverty."
The legislative district around Hill Air Force Base has the highest concentration of check-cashing stores in the state. But at least Congress capped payday interest rates for military members at 36 percent.
If only lawmakers cared as much about the rest of us.
