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Two years ago, the payday-loan industry blocked reform with tactics that helped fuel the scandals that toppled former Attorney General John Swallow. On Thursday, lawmakers passed a reform bill that sailed to passage thanks to the scandals.
The measure will give borrowers time to pay off loans without interest or sanction after 10 weeks of high-interest payments; ensure that any lawsuits against borrowers are filed in courts near their homes; and require data disclosure that may end years of debate about whether the industry is predatory.
The Senate passed HB127 on a 29-0 vote, and sent it to Gov. Gary Herbert for his signature. The House previously passed it 69-4.
The House Special Investigative Committee recently found that in 2012, the industry quietly spent hundreds of thousands of dollars — funneled by Swallow in hard-to-trace ways — to defeat former Rep. Brad Daw, R-Orem, who had pushed for reform.
In return, payday lenders also gave Swallow big donations in "dark money" that he used to defeat his primary election opponent, Republican Sean Reyes, who eventually replaced Swallow after he was pressured to resign.
The sponsor of the reform bill this year was Rep. Jim Dunnigan, R-Taylorsville, chairman of the committee that investigated Swallow.
"There have been concerns voiced by the lending industry. They are not excited about this legislation," Sen. Curt Bramble, R-Provo, the Senate sponsor of the bill, said in debate earlier this week. "But these are some needed reforms that should have some positive impact."
Payday loans currently carry an average of 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 has said lenders' threats of suing borrowers for default or threatening to deposit checks that borrowers leave 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.
The bill would give borrowers 60 days after reaching the 10-week limit to pay off the debt without lenders taking further action against them.
"This ends that cycle of debt," Bramble said.
The bill also would require lenders to file any default lawsuits where borrowers live or obtained the loan. Many lenders now make customers waive that right.
Lenders also would be required 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.