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Legislature OKs bill to stop high-interest lenders from having debtors arrested

(Courtesy of Kim Raff for ProPublica) Jessica Albritton, at home with her kids in Ogden, on Oct. 15, 2019, has been arrested on bench warrants after missing payment for a loan she received from Loans for Less.

The Legislature gave final passage Wednesday a bill to stop a high-interest lender that has managed to jail borrowers who default on loans and seize their bail money — and dropped a controversial proposal that would have allowed collection agencies and attorneys to use that practice.

The Senate voted 24-3 to pass HB319, and the House then concurred with its amendments on a 68-0 vote. It now goes to Gov. Gary Herbert for his consideration.

Rep. Brad Daw, R-Orem, sponsored the bill after ProPublica last year reported how Loans for Less — which offers auto title and installment loans at triple-digit annual interest rates — obtained warrants against people it was suing for nonpayment of loans.

The borrowers technically are jailed for not responding to a court summons requested by the lender, since it is against the law to jail someone because of an unpaid debt and Congress has banned debtors’ prisons since 1833.

Still, constables appeared and threatened arrest if people could not come up with hundreds of dollars in bail. ProPublica found at least 17 cases in which Utahns had been jailed — anywhere from a few hours to a couple of days.

That practice was codified by a law that legislators passed In 2014 that made it possible for creditors to get access to bail money posted in civil cases.

Daw’s original bill would have simply revoked that law.

But Sen. Kirk Cullimore, an evictions and collections attorney, sought to change the bill to allow attorneys such as himself and collections agencies to use the bail forfeiture provisions — and had proposed amendments to allow that, although they were never adopted.

Cullimore said earlier, “My office doesn’t regularly use this tool, and hasn’t for several years. And we never had anybody arrested. But there are some collection firms that still like to have this tool in their back pocket and are not abusing it.”

After news reports about such maneuvering, Sen. Curt Bramble, R-Provo, the Senate sponsor of the bill, offered a substitute that returned mostly to Daw’s original proposal, and again revoked anyone from using arrest-and-seize bail provisions.

But the substitute approved gave collection agencies a consolation prize: it allows them to charge a “convenience fee” when debtors use credit or debit cards to pay them. It contains no apparent cap on that fee.

Bramble said Wednesday that the substitute approved by the Senate “now has agreement of all the various stakeholders who have been willing to weigh in.”

The bill contains other revisions for high-interest lenders.

One would close a loophole that some payday lenders use to avoid a requirement that they stop charging interest on their loans after 10 weeks and offer a no-interest extended repayment plan. Some evaded that by persuading borrowers to take out different signature loans just before the 10-week deadline.

Daw’s bill also would lengthen from 10 to 30 days a required window between notifying borrowers that they face legal action and actually taking them to court.

The bill would also require the state to collect much more data annually about payday and other high-interest lenders. That includes how many loans that payday lenders make, the total dollar amount loaned, the number of borrowers who extended loans and the percentage of loans that are not repaid.

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