Religious Groups in Utah: Payday Advance Lending is Predatory
By Paul RizzoPayday Loan Writer
The Coalition of Religious Communities is calling on Utah's financial institutions to stop providing business loans to payday cash advance lenders and instead find a way to offer more loans directly to the state's economically disadvantaged.
From the parking lot of a Taylorsville Zions Bank, leaders of the coalition - a Salt Lake-based group representing an array of faith organizations - called payday lenders "the ugly stepchild of the banking industry," propagated in part due to of banks' failure to provide loan products to the poor.
"Payday lenders are among the most predatory industries in the nation," said Glen Brown, chairman of CORC's steering committee.
Brown pointed to data from the Utah Department of Commerce that indicates that Zions Credit Corp., an affiliate of Zions Bank, provided a loan to Check City Partnership, which operates most of the check-cashing/instant cash loan outlets in Salt Lake County.
"In the past, bankers and banking lobbyists have been among the most vocal opponents of capping interest rates of payday lenders," Brown said. "They have fought with us every year at the state Legislature. And now we know why they have opposed us so strongly and vocally."
Documents provided to the Deseret Morning News by CORC did not show loan amounts or for what purpose the money was used. George B. Hofmann, executive vice president at Zions Bank, said Zions records show that it provided a single "small furniture and fixture lease" to a Provo Check City, and rejects CORC's characterization that Zions is nefariously engaged.
"Zions Credit Corp. is a leasing company that provides small-ticket leases," Hofmann said. "It does not provide funding for folks who then turn around and provide [payday cash loans] to the economically disadvantaged."
Still, CORC volunteer researcher Keith Debos wants banks to "step up" and provide loan products and services so people can avoid check-cashing companies altogether.
"There's obviously a need for the product. There's a demand for the product," Debos said. "We don't want to make it illegal. These people need credit, obviously - they're showing up at payday lenders. So why (doesn't) the conventional financial industry step up and start offering a product to these people?
Pointing to a bill Congress passed late last week that caps the annual percentage rate of interest at 36 percent for regular and no fax needed payday loans extended to a members of the U.S. armed forces, CORC director Linda Hilton said Utah should do something to address what will be a "disparity" between what military and nonmilitary customers pay, and that CORC will get behind several industry-targeted bills during the upcoming legislative session.
Zions opposes a mandatory cap on interest rates because it believes the free market will keep interest rates at banks "in equilibrium with what the costs to banks are," Hoffman said.
Restrictions by the Federal Deposit Insurance Corp. keep it from offering short-term lending products to directly compete with cash advance lenders.
But it did launch Zions Express, a check-cashing service, earlier this year and continues its "Financial Peace University," a series of free workshops and seminars on debt reduction and financial independence.
"Zions Bank is as progressive as any bank in our market area in reaching out and helping those who, for whatever reason, have chosen not to work with a bank, and in helping people keep from getting into financially stressful situations," said Robert Brough, the bank's spokesman. "We feel good about the efforts we've made, and make, and will continue to make in order to help people."
