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PROVO -- City officials in Provo are considering clamping down on payday lending stores.
City Councilwoman Cindy Richards said she's seen a rapid growth of fast-cash loan operations in her district, some within blocks of each other. The Utah Division of Financial Institutions said there are 15 payday lender branches in Provo. The City Council is considering setting a limit on the number of payday lending stores. Ten other utah cities have taken similar steps. Critics of payday lenders -- where annual percentage rates can run up to 800 percent -- said they'd prefer more government scrutiny on the industry but said any step is good. "Like the joke about the 10,000 lawyers at the bottom of the ocean, it's a start," said Art Sutherland, chairman of the Steering Committee for Crossroads Urban Center, a nonprofit organization that assists low-income Utahns. Wendy Gibson, a spokeswoman for the Utah Consumer Lending Association says restrictions on the lenders would only drive down competition and increase the rates for customers. "Endorsing a policy that would limit payday lending competition in an already highly regulated market does not help the customer," she said. Paul Allred, deputy commissioner of Utah Division of Financial Institutions, which regulates the payday lending industry, said he doesn't mind cities setting zoning restrictions on payday lenders -- but they shouldn't overstep their authority. The state allows lenders to charge interest for 12 weeks. Lenders also required to disclose annual percentage rates and terms of the loan. "We tell people to be informed, understand what it is your doing," allred said. "Don't allow it to become a long-term loan, don't use it like you would your credit card." Glenn Bailey, executive director for Crossroads Urban Center, said some people desperate to pay their bills may not understand how triple-digit percentage rates work and quickly find themselves deeper in debt. "It's legalized loan sharking," he said. "They're getting people who are desperate and get them trapped into a debt cycle ... That makes their situation worse." Cities such as Orem, Sandy and West Valley have already limited the number of deferred-deposit lending stores in their boundaries. Some cities also prohibit the shops from being within a mile of one another. |
