Recently, the Utah Department of Financial Institutions – an agency that regulates Utah state financial services of payday lenders, banks and other financial service providers – published an annual report to the public. Those who keep track of these sorts of things are very happy to announce that the laws revealed in the report allow a measure of protection for consumers and provide borrowers with choices when it comes to credit. However, there seems to be some bad data with a topic that means a lot to many people.
The report from the DFI stated that there were more than 45,000 short term (payday) loans that were not fully paid off after 10 weeks. In reality, these 45,000 loans are just a drop in the bucket when compared to the hundreds of thousands of payday advance loans that are given in Utah every year. The majority of Utah citizens are able to fully repay their loans within 10 weeks. Those who cannot – who only represent about 7 percent of total borrowers – were able to make use of state sanctioned safeguards that allow them to enter into a two month repayment plan that prevents interest from accruing.
The 10 week safety cap is considered an important piece of state legislature, and was passed not because of government watchdog groups or angry letters to editors of local papers, but was passed because of urgings from actual payday lending companies. The payday lenders are the only financial companies that have regulated interest cap limits. These safeguards help to prevent consumers from getting trapped in cycles of seemingly never ending debt.
You could wrack your brain all day long and not be able to come up with any other financial institution that allows their loans to stop accruing interest, and extends payback periods, without imposing additional costs on consumers. The majority of payday lenders in Utah are more than happy to offer this option to their customers, and consider it a unique perk that other financial service providers are unable – or even unwilling – to provide to their customer base.
It is sad, then, to learn that the allegations of “debt cycles” is not quite as accurate as one might think. New legislation is trying to force payday lenders to verify whether or not a person is able to repay their loans prior to approving said loans. You would think, if you listened to the opponents of payday lending, that the lenders are actually looking for the types of borrowers who are unable to pay them back. This would be silly, of course, because lenders are giving loans from their own funds, and surely want to get paid back in order to stay in business.
No matter how many articles get written that paint payday lending companies in a bad light, and no matter how much certain liberal parties would like to attack payday lenders, the fact remains that this industry is in favor – at least in the state of Utah – of policing itself and doing all that it can in order to assist the minority of consumers who are unable to pay back their payday loans within ten weeks. Of course, you won’t read about this sort of thing on most liberal, mainstream websites. But the truth is the truth, and the truth is that payday lenders are taking more risk than other lenders, while still showing more compassion to their customers than any other financial service providers in existence today.read more