Payday loans have no loan limit or interest rate limit in Utah

Payday loans are coming under increased scrutiny these days, as more and more cities become concerned about the proliferation of such businesses within their boundaries.  In some states, payday loan stores are as common, or more so, than fast food restaurants. If you need a quick $100-500 loan, with interest rates that may run 500-1000% per year, you can find one most anywhere in Utah.

“But I don’t live in Utah!”, you may say. “Why should I care?” You should care because the Internet now offers payday loans, and the loans offered via the Web are governed by the laws of the state in which the Website is based. And with the loosest payday loan laws in the United States, Utah is quickly becoming the Internet payday loan capital of the United States.

Most states have caps on the amount of money that may be lent by payday loan stores; such amounts typically range from $200-500. Most states also have limits on the amount of interest that can be charged. Utah seems to be alone in having a cap on neither.

But isn’t Utah full of religious types? Doesn’t the Bible have nasty things to say about lending money at interest? Yes, and yes. But Utah has always had a relatively lax view of banking legislation, and Utah is unique in offering a type of financial institution known as an “industrial bank.” An industrial bank allows a corporation whose primary business is not banking to open up a bank for large, non-consumer, financial transactions. Such banks are prohibited by nearly all other states. By opening an industrial bank, a corporation then can extend their financial operations to the other states. Industrial banking has been quite lucrative for Utah, and many companies have founded such institutions there. That has led to thousands of jobs for Utahns, and that always keeps legislators happy.

Since Utah doesn’t want to hurt a business that clearly has been good for the state, legislators are reluctant to tighten any banking regulations. “After all,” the thinking goes, “If they put caps on payday loans, won’t they put caps on mortgages or auto loans next?” That’s preposterous thinking, of course, but that, combined with hefty financial contributions to the mostly-Republican legislature, keeps the wheels greased in favor of the banking industry.

The result is a state that has 60% more cash advance loan stores per capita than the national average and interest rates that can, and do, exceed 1000% percent per year for short term loans.

And thanks to the increase in such lending offerings online, those interest rates can now be had by just about anyone who needs a short term loan. Most other states do have caps on such loans, so be careful when applying for one online. Read the fine print and make sure that you know what you’re agreeing to repay.

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