Those brightly lit, garish-looking storefronts that promise "CASH NOW!" and "NO CREDIT CHECKS!!!" are the purveyors of payday loans, or "deferred deposit loans," as the Utah Code prefers to call them.
The loans are usually for smaller amounts, between $50 and $500, but carry annual interest rates often exceeding 500 percent.
The easy terms make the transaction enticing. The lender gives you $300, you give the lender a check for $360, post-dated for two weeks in the future. Yes, it costs you $60 for the $300, but you have to get the car tire fixed right now and you won't lose any time off work, so the $60 sounds like a bargain.
The system works fine until there is a problem -- and the future can hold many problems.
The next paycheck ends up a little short, and you don't have the $360 to cover the check you wrote. Panic sets in. You know you need money, so you head to the next payday store down the block.
That would be the wrong move.
Payday loans come with very onerous terms and are highly regulated. No one is going to come and break your legs if you can't pay. In fact, if you know your rights, you can force the payday loan store to work with you and limit the amount of fees and costs.
The applicable law is Section 7-23-401 of the Utah Code. Here is a list of things that a deferred deposit loan store cannot do under Utah law:
* The lender cannot threaten to use or use the criminal process in any state to collect on the deferred deposit loan.
If someone threatens criminal action for nonpayment on a check loan, then you know the caller is fraudulent. This happens primarily with online payday lenders. They cannot send you to jail if you can't pay.
* The lender cannot collect interest on the loan for more than 10 weeks. This means the most you would have to pay in the hypothetical $300 loan at 500 percent interest would be $587.
* The lender cannot call you at work if you or your employer tell the lender that you cannot take calls at work.
* The lender cannot roll over a loan without the consent of the borrower. This means you don't have to sign a new loan with the lender to pay off the old balance. You can just make payments on the original loan.
* The lender cannot require payments longer than 10 weeks from the time the loan was first made.
In 2010, the Utah Legislature added an important part to the deferred deposit loan statute, Section 7-23-403.
The law requires the lender to enter into an extended payment plan for the loan, as long as the borrower hasn't requested a previous extended payment plan in the last year. The terms of the extended payment plan are outlined by the law.
If you are unfortunate enough to need the services of a payday loan store, know your legal rights and make sure you don't pay more than you absolutely have to.
E. Kent Winward is an Ogden attorney. He can be reached at 801-392-8200 or firstname.lastname@example.org.