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."

This may not be the last time James Evans (pictured) hears criticism about his payday loan views.

In the Salt Lake Tribune, Lt. Col. Craig S. Cook, shares his feelings regarding Evans, chairman of the Salt Lake County Republican Party, for readers. We've paraphrased the letter below:

In numerous interviews against Mayor Rocky Anderson, Evans hproclaimed that he and his party "support our troops." He planned and spoke at the pro-Bush rallies "to show our support for our troops." But does this run counter to his view on instant payday loans?

After all, this is the same James Evans who reportedly owns and operates payday advance/check-cashing businesses. Republican-controlled Utah is one of only 10 states in the country that does not have a cap or a maximum interest rate on these types of bad credit payday loans.

The Center for Responsible Lending, a nonpartisan research group, states: "Payday lenders, who typically require borrowers to endorse a postdated check, trap borrowers in a cycle of debt at annual percentage rates of 400 percent."

Even worse are the affects on the armed forces. The Pentagon asked Congress for federal legislation to place an annual 36 percent ceiling on short-term loans made to members of the military recently. The report also showed that the number of security clearance denials for financial reasons jumped 10 times from fiscal 2002 to 2006.

With such information about military payday loans on hand, Cook had one question:

Is Mr. Evans supporting our troops or are they actually supporting him?

The Utah Department of Financial Institutions, in cooperation with the Utah Consumer Lending Association, has produced a new brochure, "Consumer Guide to Payday Lending."      

The goal is to provide information about instant payday loans, along with consumers' rights and legal obligations.

The most pressing aspects of the brochure are probably in the section entitled When Considering a Payday Loan, Please Remember the Following. They are:

• The finance charge on your faxless payday loan is due each time you obtain an extension.

• Compare the interest rates, charges, quality of
  service and convenience various payday advance lenders offer for loans.

• If you need an extension of your online payday loan, you are encouraged at the time of renewal to pay an amount greater than the required finance charges, thereby reducing your principal.

• If you cannot repay the loan, the payday lender may seek judgment against you for the amount of the cash loan, interest, attorney’s fees and court costs.  

Holly Mullen is a writer for The Salt Lake Tribune.

James Evans is the chairman of the Salt Lake County Republican Party.

Evans is also the owner of three instant payday loan businesses in Salt Lake County: Check Line, Check Action and Rainbow Check Cashing. When Mullen questioned Evans about the industry, tensions ran strong.

Evans, an African-American, immediately grew testy when asked about whether or not resources such as no fax payday loans prey on the poor.

"This is like what I grew up with in the South. I swear in my heart of hearts when you go against a certain group of people, liberals, they'll come back with, 'How can you even be doing this? How can you be a black man and a Republican and do this?' "It's almost as if I can't be a Republican and have my own values."

The fact is, Evans makes a living charging desperate people - many of them people of color - near-usury interest rates for quickie personal loans. Last year, when Republican state Rep. David Hogue sponsored legislation to cap interest rates at 8 percent for extension periods on repaying those loans, Evans was among members of the Utah Consumer Loan Association (the industry's lobby group) fighting it.

Hogue's bill died. No big surprise there.

According to numerous consumer protection organizations, of the 39 states with a legal faxless payday loan industry, Utah is among 10 states with no ceiling on interest rates. So in 29 states, consumers get a little protection from loan sharks.

In this state, those sharks are considered smart entrepreneurs.

It's pretty simple. If Evans, a public figure and major GOP player in this state, wants to run with the big dogs and argue racism in the process, he can explain how quick cash loans at 500 percent interest a year are not a form of slavery.

Sorry, folks, but the issue of payday loans for the military isn't going away.

Despite questions being raised about a recent Department of Defense report that called the faxless payday loan industry harmful to the war on terrorism, Utah is considering a restriction on these resources.

Twelve states prohibit triple-digit rates on cash advances, according to the Consumer Federation of America. Utah, however, currently doesn't regulate them, but Rep. Paul Ray, R-Clinton, said it's an issue that needs to be looked at.

"Both the religious and military community is very concerned about this issue," Ray said. "I do have some major concerns, especially when it affects the readiness of our troops."

The Pentagon has proposed an interest rate cap of 36 percent on such fast cash loans. However, Ray, who works as a commercial mortgage broker, said he isn't sure capping interest rates is the correct course.

"It is still too early to look at that," Ray said. "Putting caps on interest rates can influence other lending areas."

A spokesman for the Utah Consumer Lending Association and Check City, a leading short-term loan financial institution, however, called the instant payday loan federal report flawed and single-sided.

"We think the department's report is deeply flawed," Cort Walker said. "The department relied on anti-business groups that lacked the data to make such a report. What we find interesting is that one of these anti-business groups published the report on its own before it was even given to Congress. It is biased."

The Pentagon report cites one study that says military personnel are three times more likely to get a payday loan than a civilian. But is that valid?

The report said while it can make some improvements through education and regulations governing military personnel, it can't prevent predatory bad credit payday loan lending without help from Congress and the states. Sen. Greg Bell, R-Fruit Heights, agrees there is a problem, saying it hurts more than military personnel.

"We need to do more about this industry," Bell said. "They prey on low-income folks as well as the military. These people fall victim to this. To me it's really usury."

Across the nation, those facing student loan debt are thinking about payday loans. This is especially true for recent graduates in Utah.
Recent reports show that student debt is at an all-time high in that state - and students are in for another hit on July 1 when interest rates go up. The rates on existing loans will rise 1.84 percentage jumps and rates on new loans will go up from the current 5.3 percent to 6.8 percent.

Education leaders worry that the increasing tuition and growing debt are pricing some students out of higher education and causing others to bypass lower-income careers, such as teaching and social work, for higher-paying jobs so they more readily can pay off their loans. Moreover, the payday loan issue can't help but be raised.

"You have to go on to get a graduate degree to be marketable, but I didn't feel comfortable with the debt I already had to get further into debt,'' said Brigham Young graduate Max Hunsaker, 24, who owes $15,000. "I want to have it paid off. It's kind of the motivation for all the decisions I'm making right now.''

In Utah, the average debt on a bachelor's degree is about $14,790, a 45 percent increase since 1995.

"There's some growing trends that because of the costs, people have to look at what is the major that's going to help me pay this back, which is not especially good for society,'' said David Feitz, associate executive director of the Utah Higher Education Assistance Authority. "If somebody has $80,000 in debt and they have an MBA degree, we don't worry too much about them. But if they're going into elementary education, those borrowers are the ones we have concerns about."

What is one of those individuals to do? Some consider online payday loans. Others take on more than one job. Others ask parents for help.

Feitz attributes the overall debt increase to tuition hikes. Total tuition and fees at the University of Utah have shot up more than 60 percent in the past 10 years. At the same time, the amount of aid money offered through federal grants has remained stagnant.

It's a dangerous combination. Ideally, no one would need a cheap payday loan in order to afford an education. These days, however, money is tight.

The Deseret Morning News reports that Utah payday loan agencies dodged a legislative bullet Tuesday — one that would have limited them to charging just 8 percent annual interest on their loans instead of the triple-digit APRs that they currently assess.

Republican representative Dave Hogue of Riverton said he had to scrap the proposed interest rate cap in an effort to salvage other reforms he is seeking, or else all of his efforts would have been nixed altogether.

"I don't think that (interest rate cap) would ever pass this Legislature. And I don't think that would be acceptable to the financial industry because it would be a beginning of going back to usury caps that the Legislature erased in the 1980s," Hogue said.

The Business and Labor Committee of the Utah State Legislature passed Hogue's reform bill, 9-2, after he dropped the interest provision. The legislation includes restrictions such as limiting the penalties that payday lenders may collect on bounced checks that customers had used to secure payday loans.

The financial industry has long lobbied against imposing caps on payday loan interest rates, even in an industry where 521 percent is the median APR. The industry argued that capping payday loans could lead to caps on other loans from mortgages to credit cards. It could also result in large lenders leaving Utah and taking jobs with them, advocates say.

In Utah, a quick payday advance charges a median of $20 per $100 loan for two-week loans, made in advance of the borrower's next paycheck. Hogue's bill would have allowed unlimited interest on the initial loan, but only 8 percent for the extension period if the recipient could not pay it off.

Credit counselors and consumer advocacy groups say that payday loans are designed to trap desperate or unsophisticated people, but lenders say they offer emergency help to people with no credit, and their loans are cheaper than fees levied for bounced checks or for getting disconnected utilities turned back on.

Kip Cashmore, vice president of the Utah Consumer Lenders Association, believes that Hogue's proposed restrictions are not needed because most consumers are overwhelmingly happy with payday loans.

"Out of the hundreds of thousands of transactions that the companies did last year, the (state) registered 22 complaints. That's phenomenal," he said.

Many online payday loan companies instead back a bill by Sen. Ed Mayne of West Valley, which would allow the state to fine payday lenders for violations of state law. The only penalty currently allowed is to shut down a lender, a scenario that has happened only once. But some payday supporters oppose both pieces of legislation.

James Evans, Chairman of the Salt Lake County Republican Party and a payday lender himself, has been lobbying hard against any changes to state law, claiming that inflamed passions are the only motivating factors.

"I am fundamentally opposed to any bills this session because they are based on a premise that there's something wrong with the industry. And that premise is basically based on the articles [the Morning News] wrote," Evans said, citing journalistic prejudice against the industry.

The Morning News series on payday lenders found that Utah has more payday loan stores than 7-Elevens, McDonald's, Burger Kings and Subway stores — combined. Utah has some of the friendliest payday loan industry laws in the entire country, which has attracted many of the biggest national online payday lenders here.

Utah payday loan companies face relatively few regulations in the immediate future, and skeptics worry that there are few ways of policing the rules already in place. The newspaper also found that payday loan stores are concentrated in areas that near the large Hill Air Force Base, much like a similar charge levied against California payday loan companies of late.