Payday and title loan companies offer a way to get money fast — put up the title on your car as collateral and you can get a few hundred dollars. The catch? The annual percentage rate, or APR, can be extremely high, meaning you end up paying far more than what you borrowed.
Utah is home to some of the highest rates in the country, and a new report from ProPublica details how some people who fail to keep up with payments have even ended up in jail. KUER’s Caroline Ballard spoke with Anjali Tsui, the reporter who broke the story.
This interview has been edited for length and clarity.
Caroline Ballard: How this are people ending up in jail when debtor’s prison has been banned for over a century?
Anjali Tsui: Congress actually banned debtors prisons in the U.S. in 1833. But what I found throughout the course of my reporting is that borrowers who fall behind on these high interest loans are routinely being arrested and taken to jail. Technically, they're being arrested because they failed to show up to a court hearing, but to many people, that doesn't make a difference.
CB: Much of your reporting centers around the community of Ogden. Why has Utah been such a hotbed of payday and title lending?
AT: Utah historically has had very few laws governing the industry. It's one of just six states in the country where there are no interest rate caps governing payday loans.
Utah was one of the first states to scrap its interest rate ceilings back in the 1980s. The idea was to attract credit card companies to set up in Salt Lake City, but this also paved the way for payday lenders.
I discovered over the course of my reporting that there are 417 payday and title lenders across the state; that's more than the number of McDonald's, Subways, 7-Elevens and Burger Kings combined.
[Editor’s Note: According to the Center for Responsible Lending, Utah is tied with Idaho and Nevada for the second highest average payday loan interest rates in the country. Texas has the highest.]
The industry has really grown exponentially since the 1980s and 1990s, and there are very few regulations to stop them from offering these triple digit interest rates to customers
CB: With triple digit interest rates and no cap, how much are people actually paying?
AT: One borrower I talked to — her name is Jessica Albritton — is a single mom with four kids. She took out the loan because Christmas was coming up, and she needed more money to get through the holidays.
She took out a $700 auto title loan, so she put up the title attached to her trailer as collateral. This loan came with 192% annual interest rate. She ended up having to pay back double the amount she borrowed, so a $700 loan ended up costing her $1400.
She made a couple of payments, but then really struggled to keep up. The company ended up taking her to court, and when she couldn't show up to a hearing they got a bench warrant against her.
It's been a nightmare for Jessica. She's had multiple warrants, and the company has also tried to garnish her wages. A lot of the people I talked to were single moms, veterans, people who are already struggling financially. And it was interesting to me that companies are really taking advantage of people who are in a very vulnerable position.
CB: How do the payday and title loan companies defend themselves?
AT: The payday and title loan companies say they're not doing anything against the law. They're following the court process that enables them to legally sue borrowers in civil court and secure an arrest warrant for them.
I talked to the owner of Loans for Less, a company that sues people aggressively in South Ogden, and he said that suing people in court is part of his business model. But he also didn't like the fact that his customers were being arrested. He seemed to think that that was unnecessary. He told me that he would try to think twice about this process.
CB: What about efforts in Utah? What's happened when lawmakers have tried to address this in the past?
AT: Over the years, there have been various attempts to introduce laws in Utah that would rein in the industry. Back in 2009, there was a bill that went through the legislature that was attempting to cap the interest rate at 100% APR. That rule was stymied.
Other efforts to introduce similarly commonsense regulation have faced huge opposition. And as I understand, the payday and title lending industries have a number of lobbyists on the Hill who are really campaigning and making sure that these regulations stay off the books.
CB: Have you seen any reform efforts still underway?
AT: Right now at the national level, it's illegal to issue loans to active duty service members that are more than 35% APR. There's a bill going through Congress right now that is hoping to introduce that same cap to everyone.
