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SALT LAKE CITY -- Critics call them worse than loan sharks. Supporters say they provide a service by lending money to people with bad credit. Either way, so-called payday lenders are unregulated in Utah, and they'll stay that way as the result of a legislative hearing today.
Payday lenders have been criticized for years for charging an average of 500 percent interest on a loan. Today's proposal would have capped interest at 100 percent and controlled several fees, but the idea failed.
There are currently hundreds of payday lenders in Utah, and the number keeps growing. Industry spokesmen insist that capping fees and interest rates is a bad idea. They say it would be impossible to survive in a regulated environment because they don't operate like banks or credit unions.
But critics call the loans predatory, capitalizing on the poorest and weakest people. One woman at today's hearing got ensnared because she needed to pay for medicine. After her experience, she says she's disappointed at the failed attempt to require what she calls a reasonable interest rate.
"Had it been reasonable when I had my loans out, I might have been able to keep up with them instead of having to get another loan in order to pay the interest on the previous loan," Patricia Bailey said.
Bailey says her situation got to the point where it was impossible for her to pay off the loans at all.
Legislators have been reluctant to take on the payday loan industry because they see regulation as government interference.
Payday lenders say they tell people what the terms of the loans are and encourage financial responsibility, but advocates say they'll try again to protect people who are vulnerable for the high interest rates.