On Monday, the Senate moved to pass HB 40 – Check Cashing and Deferred Deposit Lending Amendments from Representative Brad Daw (Republican – Orem).
The Senate sponsor, Curt Bramble (Republican – Provo) explained that “This bill has broad consensus among the payday lenders and others that were concerned about payday lending practices. There were some loopholes – we have a limited amount of time that you can have a payday loan outstanding, you can’t continue to roll the loans over so, instead, one of the tactics that was used instead of rolling loans over, a new loan would be taken out before the first loan came due and it didn’t meet the restrictions we had [in law].”
As Daw noted on the House floor – “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, referring to the August 2016 performance audit, 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 and 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.
The bill passed 26-0, meaning it received no opposition in its path to the Governor’s desk.