This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Rep. Brad Daw, R-Orem, says he may have a way to stop people who obtain "payday loans" from spiraling into uncontrolled debt. Advocates for the poor like it, but it gives payday lenders heartburn.
Daw introduced HB113 on Friday to require listing those who are in default on a payday loan in a new state database. Once listed, no payday lender in Utah could give them another payday loan.
Payday loans in Utah typically charge around 521 percent interest, or $20 for every $100 loaned for two weeks. In comparison, the 1960s Mafia charged only 250 percent interest. However, state law allows extending such loans for only 10 weeks, after which interest must stop.
But Daw said people defaulting on loans often are pressured to go to other lenders to get more high-interest loans to pay off the first one.
"I get a loan from lender B to pay off lender A, and it goes on and on" at high interest, he said. "If we really want a 10-week limit, let's have a 10-week limit that is enforceable."
Also, Daw's bill would allow people to put themselves in the loan-ban database — an idea that came from constituents who said they need help to stop themselves from taking more such loans at weak moments.
He said some parents told him they have offered lenders to pay off loans for their adult children "on the condition that you never lend to him again. Then later they gave them more loans."
Daw said that if anyone attempts to remove themselves after self-listing in the database, they could — but the state would notify a parent or spouse or any other person listed as a contact.
"It's sort of like an Alcoholics Anonymous sponsor," Daw said.
Pamela Atkinson, sometimes called the Mother Teresa of Utah for working with the poor and homeless, likes the idea because sometimes people under pressure do not know that, by law, they have no obligation to take out new loans to pay off old ones.
"When they are desperate for money," she said, "they don't know there are other avenues to explore."
Frank Pignanelli, a lobbyist representing the payday-loan industry, said it has concerns "because databases are expensive."
Also, he said a bill passed last year that allows customers who cannot afford payments an option to stop interest at anytime — not just after 10 weeks — and work out a long-term payment. He said it would be wise to see how that works for a year or two before making other changes.