Collection Agencies Would Receive Special Treatment Under Revised Utah Bill
A bill in the Utah Legislature this year began as a plan to stop a high interest lender who found a way to imprison some defaulting borrowers then seize the money from their deposit.
The proposed changes to this bill almost allowed the lender, and a few others, to continue the practice – and were instead aimed at preventing state payday lenders from starting to do the same.
Ironically, these payday lenders – often criticized for charge more than 500% annual interest – testified that the new lending practice is so predatory that even they oppose it. But they almost became the only ones banned from using it. But because of their protests, it appears that now everyone except collection agencies and lawyers seeking collections can be banned.
Here is what happened.
After the Chamber had easily passed HB319, the Senate Business and Labor Committee held a hearing on this subject. President Curtis Bramble, R-Provo, who is also the bill’s sponsor in the Senate, and Representative Brad Daw, R-Orem, the bill’s lead sponsor, announced that an alternate version of the bill Law would later be presented to the Senate, but was not yet available to the public.
They said it would limit the ban on jailing debtors and seizing their bond money only to payday lenders – which took this group by surprise at the hearing.
“We don’t use this practice,” protested Wendy Gibson, spokesperson for the Utah Consumer Lending Association for the payday loan industry. “Limiting this section to only deferred deposit lenders may defeat the purpose of the bill. The only lender in the state that used this practice was not a payday lender, but a securities lender, which places a lien on a borrower’s car as collateral.
But Bramble said without the amendment, “there would be significant opposition to the bill” and he would likely be killed. He again asked Gibson if the payday lenders object, and she said she needed to speak with others in her organization.
Daw later said in an interview that a senator, whom he declined to name, insisted that collection agencies be allowed to use debt arrest as a tool, and would likely block the bill otherwise.
Daw fought payday lenders for years, and said that because they were his main interest, he accepted a proposal that would at least prevent them from using the debtors arrest approach and saving further reforms to the bill.
Senator Kirk Cullimore, R-Draper, later admitted in an interview with the Tribune that he was the senator involved. He is a lawyer for evictions and collections. His company’s website boasts, “Our aggressive and contentious approach to collections helps our clients get more of their money that is rightfully theirs. “
Because of his experience, he said collection agencies asked him to help them continue to pursue bail foreclosures – but he says he is not aware of any of them actually causing them to be arrested. people like the only securities lender did.
So, in discussions with Daw and Bramble, he made his initial proposal that would only have affected payday lenders. “It was based on a misunderstanding of who the attackers were,” he said.
After protests from payday lenders, a different proposal was crafted that would ban all state-regulated lenders from using arrests and seizing bail money – while still allowing collection agencies and lawyers recovery to seize the money from the deposit.
“It’s not my favorite solution,” Daw said. “You know, it’s sausage. But it’s not a terrible flavor. It stops the practice among the lenders.”
Cullimore said, “My office does not use this tool regularly, and has been for several years. And we never arrested anyone. But some collection companies still like to have this tool in their back pocket and don’t overdo it. “
He explained that after other collection options have been exhausted, lawyers can request a “further order proceeding” ordering a debtor to attend court to discuss options for resolving their debt. If they do not show up, an arrest warrant can be issued against them. They often have to show up and pay several hundred dollars in bail to fix it.
Unusual Utah law passed in 2014 allows creditors to grab money from the surety and apply it to what is owed to them.
“It’s sort of the last resort,” Cullimore said. “I don’t know of any district court collection agency that uses this tool to get people arrested or anything like that. “
This finally worked out amendment is expected to be proposed when the Senate considers the bill, likely in the final days of the Legislature. If adopted, it will then be returned to the House for approval of the amendment.
The solution also calms payday lenders enough to shoulder the bill.
“The Utah Consumer Lending Association believes that all Utahns should have the same guarantees when it comes to bail forfeiture and believes the latest version of HB319 will provide much needed consumer protection,” Gibson said.
Last year, ProPublica reported how Loans for Less – which offers auto and installment loans at triple-digit annual interest rates – is obtaining warrants against the people it was suing for defaulting on loans. .
Technically, the borrowers have been jailed for failing to respond to a court summons requested by the lender because it is against the law to jail someone because of unpaid debt and Congress has banned jails for debtors since 1833.
Still, police officers appeared and threatened to be arrested if people could not post hundreds of dollars in bail. ProPublica found at least 17 cases in which Utahns had been imprisoned – from hours to days.
Daw’s original bill would have simply repealed the 2014 law allowing creditors to recover deposits in civil cases.
HB319 also contains a few other reforms for high interest lenders.
One would close a loophole that some payday lenders use to avoid requiring them to stop charging interest on their loans after 10 weeks and offer an interest-free extended repayment plan. Some escaped this by persuading borrowers to take out various signed loans just before the 10 week deadline.
Daw’s bill would also extend a required window from 10 to 30 days between notifying borrowers that they are facing lawsuits and their prosecution.
The bill would also require the state to collect significantly more data each year on payday lenders and other high interest lenders. This includes the number of loans made by payday lenders, the total amount loaned, the number of borrowers who have granted loans, and the percentage of loans that are not repaid.