Consumer Law

Payday loans the not so cheap alternative

By Nick Slade

Apparently, all those happy payday loan customers who quickly repaid their loans, avoided disaster and extra costs doesn’t included a lot of people in Utah.
In a really great article full of all kinds of interesting facts by the Desert Morning News, their research found that payday lenders have sued nearly 27,000 Utahns for nonpayment since 2005.

According to the article Payday lenders filed so many lawsuits that they accounted for 51 percent of all small claims cases along the Wasatch Front (a string of cities in a strip approximately 120 miles long x 5-18 miles wide with 80% of Utah’s population) during the past three years, and 58 percent of those filed just last year.

In some courts, the strain is much higher. In Provo, 81 percent of all small claims cases were filed by payday lenders over three years, and 84 percent of all small claims cases last year were filed by payday lenders (and it averaged 81 percent over the three years).

“That means we have three full-time clerks who essentially do nothing but handle payday loan cases,” said Paul Vance, trial court executive for the 4th District Court.

But payday loan industry spokesmen say 99 percent of their loans in Utah are successfully repaid without court action, and they say they use court action only as a last resort.

That means that payday lenders made ~2,700,000 loans since in three years (2005, 2006, & 2007) in a state with a populations of 2,233,169.

A Morning News study in 2005 found the median annual interest on payday loan was 521 percent, or $20 for a two-week $100 loan.

Of note, the state has 447 payday loan stores registered, which is more than the number of 7-Elevens, McDonald’s, Burger Kings and Wendy’s in Utah ? combined.

Read the Article!

Full post as published by Caveat Emptor on February 08, 2008 (boomark / email).