The Salt Lake Tribune reported yesterday that payday loans in Utah now average 466 percent annual interest, according to a new report issued by the Commissioner of Financial Institutions for the State of Utah. The report said the highest interest charged on any payday loan in Utah was an astronomical 1,564 percent annual interest — about $60 every two weeks per $100 loaned. Utah has no cap on the interest that can be charged.
Interestingly enough, academic studies say the New York mafia charged 250 percent interest for its loans in the 1960s.
Also, similar to the mafia, pay day loan companies had politicians in their pocket which, in turn, grossly liberalized the ability for lenders to provide high interest loans. This past year, the legislature enacted several reforms to help consumers, such as giving borrowers 60 days after reaching the 10-week limit on a loan to pay off the debt without lenders taking any further action against them, such as filing a default lawsuit. Lenders are also required to file suit against the borrower in the county in which they live.
These reforms are a step in the right direction, but much more is needed. Especially since the process service for these lawsuits are often flagrantly unconstitutional. I see people impacted by these draconian interest rates everyday. In any given month, at least a half dozen or so new clients of mine have pay day loans that they are fighting with. In my opinion, these lenders count on their customers to default on their loans so they can run to small claims court, get a judgment, and start to garnish. In my experience, these lenders eventually collect much more than they lend out.
I’ve seen these lenders create false ‘security’ documents and threaten to take away client’s property if loans are not repaid (when they have no legal right to do so). I’ve seen them send private investigators to client’s homes and threaten to arrest them if payment is not made.
Bankruptcy is the best weapon to use against these lenders. If you are trapped in the vicious cycle of pay day loans, call today for a free consultation.