“Payday Lending does not set people up for financial failure”

FACT: There is no benefit to a Payday Lender if customers are unable to meet their financial obligations. Payday lenders do not want to see their customers fail. Sound financial underwriting practices require lenders to make sensible decisions regarding the customer’s ability to repay the loan. It doesn’t make sense to lend money to people who can’t repay their loans. Lenders require all customers to be employed or have a steady source of income, have open and active checking accounts, and telephone numbers where they can be contacted. Lenders also set limits on the amount the customer can borrow commensurate with the customer’s ability to repay in a timely manner. The consumer and the lender are best served when the lender ensures that the customer can repay the loan. If customers could not fulfill the terms of their loan agreements we would be out of business.

“Payday Loans do not target the poor; the uneducated; minorities, and those who don’t have other means of obtaining credit”

FACT: Independent studies from Georgetown University, Io Data, & the Cyprus Research Group show that the average customer makes over $41,000 annually, has some college education, and is not a minority. Eighty-five percent of customers have access to others forms of credit. Despite so-called consumer advocate claims, our customers are intelligent and educated about their credit choices.

“Payday Lenders are not expanding in Utah because of lenient laws.”

FACT: A study of six regional States with laws more restrictive than Utah’s shows that growth rates are the same or exceed the growth that is occurring in Utah. Growth is across the board throughout the United States due to consumer demand. Simply stated: this product saves people money! Payday loan fees are much less expensive than overdraft and Non-sufficient Fund fees, utility reconnection fees, and late charges charged by banks, credit unions, businesses, municipalities, and other lenders.

“ Payday Lenders are not a major contributor to Utah’s high bankruptcy rates”

FACT: Utah has led the nation in bankruptcy rates for over 30 years, well before the introduction of the payday loan industry. A recent study by a large community charity suggests that the largest health care provider in Utah, an auto finance company & the state’s largest furniture retailer are the major contributors to Utah’s bankruptcy problems.

“State regulators do not give advance warning of annual audits on Payday Lenders”

FACT: The Utah Department of Financial Institutions conducts unannounced annual audits of all Payday Lender stores in Utah. The audit process is extensive and is one of the most rigorous in the country. Auditors ensure that payday lenders are in full compliance with all of the state and federal laws that govern the industry.

“Triple digit Payday Loan rates are too high. Fees should be capped at 30% APR.”

FACT: The average payday loan fee is 2.3 times less expensive than bank and credit union overdraft charges! Customers find that the lower fees charged by payday lenders are a bargain compared to late fees, utility reconnect fees, and other more costly charges they would otherwise pay. If the APR on payday loans was capped at 30% APR, a lender could only charge $1.15 on a $100.00, two-week loan. At that rate a lender could not cover expenses such as rent and payroll, let alone losses from bad debt. No lender, not even banks or credit unions can offer short-term loans at 30% APR and remain profitable. Payday loan rates are a much less expensive alternative to overdraft protection and NSF fees, utility reconnection penalties, and late fees.

“Most States do not ban rollovers, or the extending of payday loans”

FACT: Seventeen of the thirty-nine states that regulate payday lending allow lenders to grant extensions or rollovers. States that have looked at prohibiting extensions have chosen not to do so because it limits the consumers influence over the terms of their loan. Consumers want to be able to influence the terms of their loans and not have the government make those decisions for them.

“Consumers who use payday loans are satisfied with the payday loan industry and believe that lenders are good community citizens?”

FACT: A 2005 study by the Cyprus Research Group revealed that 77% of customers who had used payday loans were satisfied with their experience. That high favorability rating was second only to grocery stores. Customers were more satisfied with their payday lending experience than their latest visit to a restaurant, bank, credit union, or government office.

“Consumer Advocates have produced little evidence that people are victimized by payday lending.”

FACT: So-called local “consumer watchdogs” and “advocates” have produced evidence of only a few people who have had difficultly with payday lending. In fact, many purported victims whose stories were told during the 2005 legislative session were either fictitious or resided out of the country! The level of consumer complaint against payday lenders is significantly lower than many other financial services offerings. Retail credit, credit counseling services, and banking have much higher levels of consumer complaint. The overwhelming majority of consumers are very satisfied with current legislation. In fact over 20,000 customers recently signed a petition in support of keeping Utah’s current payday loans in place.

“Why does Utah not have a usury (interest rate cap) law?”

FACT: Accessibility to credit has become a mainstay of our economy, especially for retail and housing activities. States that have imposed usury limits on financial institutions have limited the ability of their State regulated financial services from offering credit to their residents. As a result, financial institutions that are licensed in other states, but can operate in states with usury caps, offer financial services without being regulated by the other States. If Utah were to impose a usury rate, the net result would be an immediate inflow of financial service companies over which Utah would not have control. More importantly, Utah has now become the eighth largest financial services center in the United States. Imposition of a usury rate, irrespective of its focus would send a negative signal across the country that Utah no longer hosts an environment conducive to credit operations. The impact on Utah’s economy and labor market would be horrific.

“Why has the number of payday loan stores in operation expanded in Utah in the last several years?”

FACT: Traditional creditors for Utah consumers (retailers, banks, credit unions, mortgage lenders, utility companies, landlords, automobile finance companies, etc.) have increased the finance charges for bad checks and late/missed payments. These charges can accumulate at a rapid pace and become extraordinarily burdensome to these debtors. An increasing number of Utah consumers understand that the finance charges imposed by payday lenders are much less than the fees assessed by traditional creditors. Additionally, banks and credit unions have ceased granting “small”, “short-term”, “unsecured” credit. Without the choice of payday lending many consumers are denied the opportunity to make financial decisions that can improve their lives over the more costly alternatives that the banks, credit unions, retail lenders, and others impose on them. Payday Lending gives consumers more choice and control over their financial futures.

“Payday lenders do not oppose regulations”

FACT: Most payday lenders welcome balanced and responsible regulations to ensure that consumers are afforded appropriate safeguards and protection. Members of the Utah Consumer Lending Association were instrumental in the drafting and passage of Utah’s initial payday lending legislation in 1999. The UCLA was in support of well-drafted laws such as the prohibition of mobile payday lending operations and most recently loopholes in Utah’s collection laws, and tighter restrictions on Internet lenders. In addition to supporting responsible legislation, the UCLA has drafted and implemented a set of best practices that give customers additional protections against abusive lending practices.

“People who use Payday Loans understand the costs and the repayment terms associated with the product.”

FACT: A recent survey of 2,000 randomly selected payday loan customers from across the United States showed that over 90% of respondents understood the costs and terms of the loan. Utah law requires that lenders orally review the terms of the loans with customers. Additionally, Federal Truth in Lending laws and the Federal Reg “Z” require full disclosure of all finance charges as an Annual Percentage Rate. Banks and credit unions are exempted from disclosing their fees for overdraft protection and NSF charges as an APR. Rates, terms, and the APR of all loans are required to be conspicuously posted in each location. Consumers know the cost associated with their loans and choose to use them because it saves them money.

“Consumers don’t want the government to set in and place more restrictions on payday lenders.”

FACT: The Cyprus Research Group study discovered that over 80% of payday loan customers do not want the government placing further restrictions on their ability to get cash advance/payday loans. The findings of this study have been supported by a recent petition drive where over 20,000 Utah citizens asked their elected officials not to place further restrictions on their ability to use cash advance products.

“How does one get a payday or deferred deposit loan?”

Most payday/check cashing lenders, whether through a store or the Internet, require a customer to have a checking account and verified employment. Most do not require a credit check or collateral. These loans are completed within 5-10 minutes. Thus, borrowing money from a payday lender is relatively easy, quick and unobtrusive into the consumer's private life. This is why payday lending has become so popular among Americans in the last several years.

“What are some of the reasons why Utahns would want a cash advance loan?”

National and local studies conclude that the overwhelming reason why consumers obtain a payday loan is because of an emergency or temporary decrease in income. The data suggests that payday advances are used primarily for purposes not fully under the customers control and rarely used for nonessential spending. A majority of consumers surveyed believe that the costs associated with a payday loan are less than the fees from bounced checks, overdraft expenses; finance charges from late mortgage payments, late utility payments etc. Recent studies support customer beliefs that payday loan fees are actually less than some of the alternatives.

“Are there problems inside the payday loan industry and is anything being done to correct them?”

There are problems with Internet lenders who do not have storefront operations or not registered with the DFI. Unfortunately, federal law sometimes prevents direct oversight of these operations. Many Utah pay lenders are working with DFI to explore different means of regulating these entities.

“How do payday lenders feel about credit education for consumers?”

The best customer for payday lender is an educated customer. Payday lenders believe that they best serve their customers as an infrequent resource for emergencies and unexpected needs for cash. Consumers who are having long-term financial difficulty will not be able to pay their payday loans. Thus, most payday lenders have information in their operations that explain the details for payday loans. Furthermore, Utah payday lenders are working with DFI to expand the opportunities for Utah consumers to obtain a healthy financial education.