Payday Lenders Report 99.9 Percent Pay Off Loans
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UPDATED: Nov 29, 2011
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As a result of a new disclosure law in Utah, payday lenders were forced to disclose some previously hidden information from their books. According to the Salt Lake Tribune, Utah payday lenders say 99.9 percent of their loans are paid off before they reach their rollover limit of 10 weeks.
These payday loan lenders claim those numbers are evidence that their loans are not traps, but rather a needed and well-used service that the public as a whole benefits from.
Wendy Gibson, a regional manager for Check City and a spokeswoman for the Utah Consumer Loan Association of payday lenders, said “[That percentage] matches my experience with my customers and sounds about right. Almost everyone pays off their loans before reaching day 70. That shows we loan to people who can afford them,” as reported by the Salt Lake Tribune.
But critics are wary of those statistics.
According to Utah’s small-claims court records, payday lenders sue an average of 11,600 loan defaulters every year. If those lawsuits represent the 0.1 percent of loans not paid off, then that means payday lenders issue 11.6 million loans a year.
While Utah does not require the disclosure of the total annual number of payday loans issued, a payday lending report done in Washington State reveals that Washington’s payday lenders issued an average of 2,944,291 payday loans annually between 2000 and 2009—nowhere near the 11 million that Utah’s lenders claim.
To explain these numbers, Jerry Jaramillo, a supervisor at the Utah Department of Financial Institutions, said the disclosure law went into effect halfway through the year, so payday lenders’ computers may not have been set up to properly track their loans for a entire year.
He said “The real test will be what they report next year,” according to the Salt Lake Tribune.