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A bill to reform payday lenders continued Thursday on what has been a nearly opposition-free path through the Legislature — thanks to scandals involving the industry and former Utah Attorney General John Swallow.
The Senate Business and Labor Committee unanimously endorsed HB127 and sent it to the full Senate. It previously passed the House 69-4.
The bill is sponsored by Rep. Jim Dunnigan, R-Taylorsville, chairman of the House Special Investigative Committee. That group found that in return for big donations from payday lenders, Swallow funneled money in hard-to-trace ways to help the industry defeat former Rep. Brad Daw, R-Orem, for sponsoring previous reform legislation.
The industry also quietly gave Swallow hundreds of thousands of dollars in "dark money" donations he used to defeat his primary election opponent, Republican Sean Reyes, who eventually replaced Swallow when the latter resigned.
Even the payday-loan industry itself did not oppose the bill in a hearing Thursday, although such measures in the past often have been fiercely fought.
Wendy Gibson, a Check City manager representing the Utah Consumer Lending Alliance of payday lenders, said some provisions could help consumers. But she warned "too much regulation could potentially push our customers to use offshore, unregulated Internet lenders or potentially more expensive alternatives."
Such loans currently charge an average 474 percent annual interest in Utah. The loans are usually made for two weeks initially, but can be renewed or "rolled over" for up to 10 weeks, after which no more interest may be collected.
Dunnigan said lenders' threats of suing borrowers for default or threatening to deposit checks that borrowers left as collateral — which would result in bounced-check fees — often lead borrowers to take out more payday loans from other lenders to pay off earlier loans.
Dunnigan's bill would give borrowers 60 days after reaching the 10-week limit to pay off the debt without lenders taking any further action taken against them.
The bill also would require lenders to file any default lawsuits where borrowers live or obtained the loan. Dunnigan said many lenders now make customers 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 loans and rollovers. And it 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 assert that default rates are high while the industry insists they are low, and the required data should show which is true.