A recent study indicates that payday loan cases are clogging the courts in Utah, particularly in the city of Provo. But payday lenders say the report is biased and misleading.
80 percent of all small claims cases
The Coalition of Religious Communities reports that payday loan cases made up 80 percent of all small claims cases in the district court of Provo, Utah, between 2005 and 2010. The report further claims that payday loan cases make up 70 percent of justice court cases in Provo and 62 percent of all cases in Utah County. “The sheer number of cases adds to already severely backlogged court dockets,” the study concludes.
“We went to court one day, and in 35 minutes, they looked at almost 800 cases,” said Linda Hilton of the Coalition of Religious Communities.
One firm especially guilty, report says
Hilton says one large firm, Check City, has a particularly unfair policy. The company’s contract has a clause requiring all prosecutions to be handled in Provo, where it is headquartered. This causes an undue hardship for borrowers living in other parts of the state, claims Hilton.
A spiral of debt?
An editorial in the Daily Herald claims that, in essence, the taxpayers are paying for the collection agency of a controversial industry. The editorial goes on to surmise that the volume of cases supports the idea that people who are financially desperate enough to take out payday loans will continue getting into deeper debt.
“We had this feeling from the clients that were coming in that something was not right,” Hilton said. “But our experience here is that most people are in debt for months and months.”
Most cases default
Reannun Newton, a Provo City Justice Court administrator, disagrees. “Because most of them go to default, they process pretty quickly.” She went on to explain that, though the court may have several hundred payday loan cases a day, typically only about 10 people will show to contest them. “It is a lot of cases, but anyone who files a small claim has to pay a [$65] filing fee.”
Courts generate revenue
“Not only are these court cases not burdensome on city government or taxpayers, but the courts are generating revenue for cities and counties, thus benefiting local tax payers,” said Wendy Gibson, community relations director for Check City.
Taking it to the lawmakers
Republican Congressman Brad Daw of Orem claims to be looking at what other states are doing about payday loan regulation. He has suggested that limiting borrowers to one loan per paycheck might be one possibility. Linda Hamilton plans to take the Coalition’s report to lawmakers before this year’s session is out.