There was some bad blood on display at a Legislative committee Thursday as Rep. Brad Daw, R-Orem, sought to pass legislation curbing the ability of Utahns to take out more than two payday loans at a time. The bill saw Daw exchanging some rhetorical blows with an old nemesis: the head of an industry association for payday lenders that had been involved in funding a shadowy smear campaign that helped defeat Daw in the 2012 election.
The House Investigation into the pay-for-play antics of former Attorney General John Swallow discovered that, in the 2012 election, the payday loan industry funneled hundreds of thousands of dollars of “dark money” through a nonprofit called The Proper Role of Government Education Association. Utilizing the nonprofit for a time concealed the source of the payday loan industry's funds, pushed through the nonprofit to fund both Swallow's campaign and attack ads against Daw for having previously taken a stand against payday lenders.
In the Thursday committee, Daw debated Kip Cashmore, the owner of a payday loan chain who donated heavily through the nonprofit. House Bill 144
, Daw explained, was not an extreme approach to payday lenders, citing other states that have banned the businesses outright. His bill, he said, was instead a compromise model that would establish a database for all payday lenders so that if a borrower sought a loan, the lender would check the database; if the borrower still had more than $500 outstanding on a loan, or had two or more separate payday loans, then the lender would not be able to offer the borrower another loan.
Daw pointed out that in the previous year, 14,000 Utahns had been taken to court for outstanding payday loans, many of them ending up having their wages garnished by as much as 25 percent.
Daw said that, as a short-term emergency measure, there was a place for these kinds of loans, which typically are for around $350, to be paid back within two weeks at triple digit interest rates. However, Daw added, if a person got stuck in a cycle of taking out a payday loan and then taking out new payday loans to pay off old ones, it quickly becomes a trap that can devastate a person's life.
It was a point brought home by Tammi Diaz, who told the committee how her husband took a payday loan to help cover a vehicle repair of roughly $400. The interest piled up, the couple struggled to make ends meet and the debt ballooned to more than $7,000. The couple received harassing phone calls from debt collectors, went into bankruptcy, and almost lost their home.
“It tore my heart out and increased the stress level in my home,” Diaz told the committee in a halting voice. “I lived in fear of opening my door, scared that there would be a pay-day loan person at my door.”
Daw also told the committee that they had the comfort of knowing that Utah was following the lead of 14 other states—including Florida, which has had a database law in effect for the past 15 years. That law has greatly reduced complaints of predatory lending, and has even lowered the rate of defaults on loans for lenders in that state.
Cashmore, of the Utah Consumers Lenders Association, testified against the bill during a tense period of testimony in which he sat right next to Daw. Cashmore explained that his industry is already well burdened with regulations, and that lenders already have tools to check out possible borrowers, like a database that was already in existence and was more comprehensive than what Daw proposed, since it could see if a would-be borrower had other types of loans out, including title loans or installment loans.
Cashmore said these private-sector solutions were better than more regulations, since the industry doesn't want individuals to take out loans they can't pay back. “Remember again—this is our money,” Cashmore said. “We lend it out and we would like it back.”
Daw quickly countered, however, that the database Cashmore referred to was not comprehensive, and was not used by all payday lenders. “What Mr. Cashmore has danced past is [that it is] if they subscribe to the database; not all lenders do,” Daw said. “That's the cold hard fact.”
Clearly the sticking point was that Daw's bill would restrict payday lenders from lending to individuals with more than two loans. Some on the House Business and Labor Committee themselves were torn over adding new regulations to the industry.
Rep. Jon Cox, R-Ephraim, pointed out that a Pew Charitable Trust study on payday loans found the majority of uses felt they were victimized by the loans, but on the other hand a majority of the borrowers also admitted the loans provided relief. “It's kind of two conflicting thoughts in one,” Cox said.
But the committee, overall, was no so conflicted, and voted against passing the bill out of committee, killing it by a 6 to 3 vote.
To read the bill click here. To contact Rep. Daw about this bill click here. To find your legislator to contact them about this bill click here. For more updates from the hill visit CityWeekly.net and follow @EricSPeterson and @ColbyFrazierLP on Twitter.