Do payday lenders offer a way out or just enough rope to. Hang yourself?

• Author: Webb, Gayien
• Position: Payday Loans

Sixty-four-year-old Patricia Bailey is a self-described addict, but not of drugs or alcohol; she's addicted to payday loans--easy money for a woman who has oft times been desperate to make ends meet. Despite being hounded by collection agencies and creditors for 10 years, enduring wage garnishments, losing her home and filing for bankruptcy, Bailey says she still feels the urge to take out another payday loan.

"I do still think about them when I am on a temp assignment. I have no meds for my diabetes right now and my car needs a new steering column" she explains, "but I am clean at this point in my life."

Recognizing her dependence on payday loans, Bailey is today an advocate for greater regulation of the industry, especially online lenders. She has testified thrice before state legislators and wants to help prevent others from being swept into the "cycle of debt" she has experienced.

Of course not everyone is a critic of the payday lending industry. You might call Rachel Lopez the industry's poster woman. As a 19-year-old college student, she needed some quick cash to pay for her books and school supplies. She knew her single mom couldn't afford to help, so, despite the fact that she had a credit card and says she could have used it to pay for her books, she opted instead to take out a payday loan from CheckCity.

That was nine and a half years ago. Today, Lopez is manager of CheckCity's Orem store. After engaging in several payday loans through the company, Lopez says she wanted to work there. She's been a store manager for six years now and says she loves helping customers who visit the store for their short-term credit needs.

"The loans helped me out and I know we help people. We really do," she says.

Market Forces

While some 14 other states have banned payday lenders (also called "short-term lenders" or "deposit lenders"), the industry has found fertile soil in Utah with more than 500 payday lenders. The payday loan industry estimates there were more than one million cash advance transactions in Utah in 2010, but the actual number may be significantly higher. For example, a 2006 study by the Center for Responsible Lending estimated that Utah's payday lenders had loan volume of nearly 453 million in 2005--with $69 million in costs to Utah families.

One primary reason payday lenders are sprouting all over the Beehive State is the friendly regulatory environment and, most assuredly, the lack of a usury cap. Interest rates that range from 390 to 1,000 percent have brought condemnation from Utah consumer advocate groups.

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