The last time a legislator attempted payday loan reform, it not only died but the industry helped to defeat the sponsor with hundreds of thousands of dollars in "dark money" — a central part of scandals surrounding former Attorney General John Swallow.
But because of that scandal, a reform bill flew through the House Monday. HB127 passed on a 69-4 vote, and now goes to the Senate.
It is sponsored by Rep. Jim Dunnigan, R-Taylorsville, chairman of the House Special Investigative Committee. It found that in return for big donations from payday lenders, Swallow funneled money in hard-to-trace ways to help payday lenders defeat former Rep. Brad Daw, R-Orem, for sponsoring reform legislation.
Also, the industry quietly gave Swallow huge, murky donations he used to defeat his primary election opponent, Sean Reyes, who eventually replaced Swallow when the latter resigned.
"This is a positive, carefully crafted step toward consumer protection," Dunnigan told the House about his bill.
Such loans currently charge an average 474 percent annual interest in Utah. They are usually for two weeks initially, but can be renewed or "rolled over" for up to 10 weeks, after which no more interest may be collected.
But Dunnigan said that lenders’ threats of suing borrowers for default or threatening to deposit checks that borrowers left as collateral — which would bring bounced check fees — often lead borrowers to take out more payday loans from other lenders to pay off their earlier loans.
Dunnigan’s bill would give borrowers 60 days after reaching the 10-week limit to pay off their debt without any further action taken against them by lenders. "It gives them a good option to try to break the cycle of debt," Dunnigan said.
The bill also would require lenders to file any default lawsuits where borrowers live or obtained the loan. Dunnigan said many lenders now make borrowers waive that right, and lenders do such things as sue people living in St. George in an Orem court — making cases difficult to defend.
HB127 also would require lenders to do at least minimal checking to see if borrowers can afford the loans and rollovers, including looking at pay stubs, doing a credit check or looking at repayment history of previous loans.
It also would require the industry to report to the state how many loans go the full 10 weeks, how many end up in default, and the amounts involved. Dunnigan said advocates now claim that default rates are high while the industry claims it is low, and the data should show what is true.
Rep. Larry Wiley, D-West Valley City, who is sponsoring two other payday bills — HB46 and HB47 — that more closely mirror what Daw unsuccessfully pushed two years ago before payday lender targeted him, called Dunnigan’s bill "a good start," but said he wishes it went even further.
They were the only two members to talk during House debate on the bill.
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