On Wednesday morning, Representative Brad Daw (Republican – Orem) was able to pass HB 40 – Check Cashing and Deferred Deposit Lending Amendments out of the House unanimously and without incident. Such a feat was actually somewhat impressive, considering the long and unkind history Daw and the payday loan industry have had over the years.
“HB 40 was the culmination of an audit of the payday loan industry. Several things were discovered during the course of the audit – If you want some interesting reading, I would recommend you read the audit – it’s quite interesting…It’s one of the more interesting audits I’ve seen,” Daw told the body, referring to the August 2016 performance audit of the Department of Financial Institution’s regulation of the payday loan industry. That audit found that only 17 percent of those who used a payday lender actually used the service as intended – rarely, as a one-time cash advance.
The audit also found that nearly 40 percent of users took out at least four loans a year and often engaged in extending their loans by many weeks or months. Furthermore, the audit found that frequent borrowers, over 30 percent of those who use payday lenders, would take out between 7-8 loans a year, often holding multiple loans at the same time. Of these frequent borrowers, the average individual held at least one payday loan for 213 days, paying an average of $1,248 in interest off of that loan. Finally, the audit found that 14 percent of borrowers will default on their loan, often within weeks of taking out the loan, never paying interest.
At its heart, HB 40 takes direct aim at the payday loan industry by adding greater oversight to the industry by closing a legal loophole that allowed a payday loan to, in practice, last longer than 10 week maximum allowed by law. What many payday lenders are doing in practice today is that, at roughly the eight week mark, they initiate a new payday loan to cover the cost of the previous loan – in essence rolling over the loan. “to the borrower it looked exactly the same as a rollover,” Daw explained, “but to the lender it started that 10 week clock.”
Daw would call this practice “slight of hand” and made it clear that his legislation explicitly states that this practice of refinancing is not allowed under any circumstance.
Representative Daw and the payday loan industry have a history that involved dark money from the payday loan being funneled through organizations to allow for the money to be spent in a political effort to remove Daw (who has been working for greater consumer protections in the payday loan industry for years) from office. In 2012 these efforts were successful, and it is widely speculated that the influence of dark money in Daw’s primary lead to his defeat.
This session Daw is also running legislation designed to eliminate dark money from the electoral process.
The lack of discussion or debate seemed to take Speaker Hughes by surprise, however when he opened the vote to the body, the bill would be unanimously approved. HB 40 is now headed to the Senate to be consdiered.