Utah payday loan rates are second in the United States. Only Texas is higher.


A study indicates that they cost an average of 652% annual interest. Only Texas is higher.

(Leah Hogsten | Photo from the Tribune) New study says payday loan rates in Utah are second highest in America. Only Texas is higher.

Utah consumers now face the second highest rate in the country for payday loans: 652% annual interest, according to a new study.

The only state where the average rate is higher is Texas at 664%, while Utah’s rate is on par with neighbors Nevada and Idaho, according to the Nonprofit Center for Responsible Lending. (CRL).

Charla Rios, a researcher at CRL, said the reason for Utah’s high rates is that it has no cap on the interest that lenders can charge. She found that in most states, their average payday loan rates basically match their interest limit – but the sky is the limit in Utah.

(Center for Responsible Lending) Map of average nationwide payday loan rates from the Center for Responsible Lending.

Utah once had such an interest rate cap, but it was removed in the 1980s. This was seen as one of the reasons for the rise of payday loan and interest-rate companies. high in the state.

“Utah could consider putting in some protections or just a cap… that would effectively limit payday lending in the state,” she said.

Rios noted that 17 states and the District of Columbia have an interest limited to no more than 36% APR – and the Illinois legislature has just passed such a bill that awaits possible signature by its governor. She said the caps correspond to the 36% limit that federal law places on loans to members of the military, and her group calls on all states to consider and adopt them.

“We know from research – and these rates themselves tell the story – that they [payday loans] are not a lifeline. They are drowning people in a sea of ​​debt, ”she said.

The LCR calculated typical payday loan rates in each state by examining how much the top five payday lenders in the country would charge there for a $ 300 loan for 14 days.

The 652% interest rate is higher than the 554% average found here last year in a report from the Utah Department of Financial Institutions, which examined the rates charged by all payday lenders in the world. ‘State and not just the big five. He noted that at 554%, borrowing $ 100 for a week costs $ 10.63.

The same state report said the highest rate charged by any Utah payday lender in the last fiscal year was 1,669% APR, or $ 32 per week on a $ 100 loan. Interest for the maximum 10 weeks allowed on a loan at this rate would cost more than three times the amount borrowed ($ 320 versus $ 100).

“We cannot look away from the harm predatory loans inflict on people who are literally fighting for their survival,” especially during the pandemic, Rios said. “Payday borrowers are forced to file for bankruptcy at higher rates than people in similar financial situations. … We must continue to push for reform until all American families are protected.

The CRL is also calling on the Biden administration and Congress to end another program – involving certain Utah banks – that Rios says is being used to bypass interest caps in states where they exist. The CRL says revisions to the rules by the Trump administration have enabled them.

She calls them “bank lease” systems, in which payday lenders solicit, structure, and collect loans that charge up to 222% annual interest – but partner banks in states such as Utah issue or technically hold loans to escape ceilings elsewhere.

“Utah is home to a lot of these banks that we see engaging with other high cost lenders to provide this game,” Rios said.

Last year, in congressional testimony, consumer groups attacked bank leasing partnerships with three Utah banks they say they are involved: FinWise, Capital Community Bank and TAB Bank.

“The rogue banks that enable these systems have a clear belief that regulators today will turn a blind eye to this abuse of the banking charter,” Lauren Saunders, associate director of the National Consumer Law Center, said last year. the House Financial Services Committee.

Now Rios said: “We must overturn the dangerous rule … imposed by the OCC [Office of the Comptroller of the Currency] during the previous administration. And we should cap the interest rates of predatory lenders across the country to end the payday loan debt trap for all families. “

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