Courtesy of Utahtitleloansinc.com / Google Image © 2017 Google.com
In accordance with the new state report 1 out of every 6 Utah payday loan stores closed for the period of the last year. It seems that recent changes in legislation were not introduced in vain – borrowers started using other options.
However, payday lenders had to counteract as well, and they did – they raised loan APR to nearly 485 %, which is almost twice as much as the Mafia lenders of the 60s used to charge for their loans. And that’s saying something.
One more interesting thing the report shows is that all the more Utah borrowers are unable to repay their debts even at the end of the 10th week (a maximum-allowed roll-over period in Utah.)
Thus, now Utah has got 462 stores instead of 553. Though, some stores disappear, many others stay and refuse to lose their ground – not even fast food chain stores combined can overcome them in numbers.
There are 50 payday lending companies in Utah and about 32 online ones. Add 61 car title firms, and you get the picture – high interest loans industry feels pretty comfortable here.
What about the rates? The report states that those have grown as well. APR for the previous year equaled 459.14%, now it is 484.74%. That’s impressive. Some of the companies even managed to charge 1,407.86% APR for a one-hundred dollar loan per week. Quite impressive.
Endless Debt Circle?
Payday loans are notorious and represent the subject of heated debates all over the country; and Utah is no exception. Here the situation is peculiar because payday lenders can actually charge such high interest loans. And they do.
The thing is that (as it has already been mentioned) borrowers fail to repay the loans and get into debt traps as a consequence – only 45,114 loans taken were not repaid even after a 10-week rollover period. The previous year was no better – 43,564 but, still, the number has grown.The report shows that more people get into a difficult financial situation by using small-cash high-interest loans (even if this option is sometimes more affordable and far more convenient than a credit card loan.)
Well, what has already been done? There have been several legislative attempts to help borrowers as well as to bring more order to this industry regulation. Two years ago an extended payment plan (in writing) was introduced as a compulsory requirement for each loan default case.
One more law allows quick loan cancellation at no cost in cases when a borrower changes their mind fast. The report states that is resulted in 3,819 cancelled loans this year and 2,332 in the previous year.
Measures to be taken (more?)
This spring new law took effect – it prohibits taking new loans before the old ones are repaid. So, the present report only shows the data for a small period of time; however, it seems to be working – people do as they are told. But not everyone, of course.
Surely, it’s a good trend that new regulations appear and they are aimed to protect Utah citizens in the first place. However, some more laws would be nice, some policymakers think, and, perhaps, they are right. After all, interest caps proved to be a good thing for many neighboring states.
The new Consumer Financial Protection Bureau rule that is to take effect in 2019 will require payday lenders to check the solvency of their customers as well as their ability to cover basic expenses before issuing a loan. Plus, it will limit the number of successive loans to 3. As we have already written, it is hard to predict whether the new rule will actually see the light as it has already gained a number of opponents in the present Cabinet and in the Congress.