The Utah Senate approved payday lending reform on Thursday and will be sent to Gov. Gary Herbert's office for a signature.
HB 127, sponsored by Rep. Jim Dunnigan, R-Taylorsville, chairman of the House Special Investigative Committee, follows a payday lending scandal in the state.
The Utah House, after an investigation, revealed payday lenders financed wrongdoing that helped bring about the resignation of former Utah Attorney General John Swallow. Those acts included secretly funneling money to defeat a lawmaker who tried to more closely regulate the industry.
Swallows campaign staff set up nonprofit groups that by law did not need to disclose their donors, according to House investigators. They were used to send hundreds of thousands of dollars from payday lenders to defeat former Rep. Brad Daw, R-Orem, and help Swallow defeat his primary opponent, Sean Reyes, who later was appointed to replace Swallow.
Dunnigan has said lenders threats of suing borrowers for default or threatening to deposit checks that borrowers left as collateral which would result in bounced-check fees often led borrowers to take out more payday loans from other lenders to pay off earlier loans.
Payday loans, typically for two weeks, currently can be renewed for up to 10 weeks, after which no more interest may be paid. Dunnigans bill would give borrowers 60 days to pay off the loans before lenders can take any action against them. Payday lenders often charge an average of 474 percent annual interest on loans in Utah, according to state data. They did not publicly fight the measure, but many have contended reform is not needed.
The bill also would require lenders to file any default lawsuits where borrowers live or obtained the loan. Dunnigan said many lenders now make borrowers waive that right, and lenders do such things as sue people living in one city in another city's court - making cases difficult to defend.
Utah residents, by a 2-to-1 margin, favor more state regulations over payday lenders, according to a SurveyUSA poll for The Salt Lake Tribune. The survey found that 58 percent of residents favor more regulation of the industry, 25 percent oppose it and 17 percent are unsure.