SALT LAKE CITY (AP) – Idaho, Nevada and Utah have some of the highest interest rates in the country for payday loans, according to a new report.
The study, released this week by the Pew Charitable Trusts, found that their rates are so high, mainly because they are among the seven states that have no legal limits on them.
Idaho payday lenders charge an average of 582% annual interest on their loans to run the nation, Salt Lake City Grandstand reported.
Next are South Dakota and Wisconsin, both at 574%; Nevada, 521%; Delaware, 517%; and Utah, 474%.
Among states with in-store payday lenders, the lowest average interest charged is Colorado at 129%, which is its legal limit. The next lowest are Oregon at 156% and Maine at 217%.
Fifteen states ban payday loans or cap interest rates at 36%. None of them have storefront lenders.
Without limits on interest rates, competition among lenders doesn’t tend to lower rates much, research shows.
Representatives of the Alexandria, Va.-Based Community Financial Services Association of America did not immediately respond to requests for comment on Sunday.
The study also found that the country’s four largest payday loan companies charge similar rates to each other in any given state, usually at the maximum allowed by law. States with higher limits have more stores, but the rates remain higher and the competition doesn’t bring them down much.
“This new research shows that the payday loan markets are not competitive,” said Nick Bourke, project manager for Pew. The gallery.
The study urges states to limit payments to “an affordable percentage of a borrower’s periodic income,” saying monthly payments above 5% of gross monthly income are unaffordable.
On average, a payday loan takes 36% of a person’s pre-tax salary, Bourke said.
“Customers just can’t afford to repay this while meeting their other financial obligations,” he said. “That’s why you see people end up borrowing loans over and over again.”