Utah Establishes Payday Loan Ability To Repay Requirements

Payday Lending

On March 29, Utah Governor Gary Herbert signed HB 127, which amends state law to require deferred deposit lenders, i.e. payday lenders, to assess a borrower’s ability to repay the loan “in the ordinary course, which may include rollovers or extended payment plans” and to obtain a signed acknowledgment from a borrower that the person has the ability to repay the loan. The legislation states that a lender is in compliance with the ability to repay requirement if, at the time of the initial period of the deferred deposit loan transaction, the lender obtains (i) a consumer report; (ii) written proof or verification of income from the person seeking the deferred deposit loan; or (iii) prior repayment history with the deferred deposit loan from the records of the deferred deposit lender. In addition, if a borrower is charged 10 continuous weeks of interest or fees on a payday loan, including rollovers, then at the end of the 10-week period, the lender must allow the borrower, upon the borrower’s request, to repay the loan and rollovers under an extended payment plan that meets certain requirements. The legislation also requires a lender to provide notice of default at least 10 days before filing a civil action to collect on a deferred deposit loan.