Payday Loan Times

Despite early momentum in the Legislature to rid Arizona of payday cash advance lenders, the industry and its friends at the Capitol continue to dominate the political debate — to the financial detriment of the state’s poor.

Eight bills were introduced during this legislative session that would have either effectively shut down payday lending or placed major curbs on the industry’s activities. The Republican leadership has swatted all the measures away without much of a fight.

All payday loan online eight bills failed to get out of committee despite the fact that about half of them were sponsored by members of the Republican majority.

Tucson Republican Rep. Marian McClure sponsored HB 2224, which would have prohibited the renewing, or “rolling over,” of payday loans. Her bill was the only one that got as far as a committee vote. It failed 5-4.

The situation is so bleak for opponents of payday loans, which includes this newspaper, that maintaining the status quo would be seen as a victory.

The 2000 law that allowed payday lenders to do business in Arizona is set to expire, or sunset, in 2010. The sunset provision is seen by industry foes as the one saving grace to the law — and the last chance to get rid of payday lenders if legislative efforts continue to fail.
But it appears the sunset provision might also be in jeopardy, which we believe would be a permanent black eye for Arizona.

McClure told us that she is preparing a faxless payday loan reform measure in the form of a “strike-all” bill that would, among other things, make loans nonrenewable, limit the interest rate to a flat 15 percent for two weeks and institute a structured payment plan if a borrower is unable to pay back the loan on time.

However, as part of McClure’s reform package, she would do away with the sunset provision.
“We cannot even get payday-loan bills out of committee. A strike-all like this would at least have a chance,” McClure said. “It’s a realistic approach to the problem since we aren’t going to be able to get rid of payday lenders anyway.”

McClure said that even if the sunset provision goes into effect, the industry will fight through the courts to stay in business. Those lawsuits, she said, will keep them operating far beyond 2010.

She also said the growth of the industry on the Internet will mean Arizonans will still have access to expensive personal loans, no matter what the Legislature does.

While we agree opponents of payday loans face an uphill fight in the Legislature, where the industry has at least four lobbyists carrying its flag, we don’t believe getting rid of the sunset provision is the answer.

The sunset provision is the only assurance our community has that quick cash loan lenders may someday be forced to shut their doors.

“I think the sunset provision is the one thing we need to hang on to with all of our might,” said Kelly Griffith, deputy director of the Southwest Center for Economic Integrity, a Tucson group that fights predatory lending practices. “Realistically, if we can just hang on to that sunset, we will have achieved a substantial victory for 2007.”

We believe lawmakers should continue to propose and fight for meaningful legislation — like a 36 percent interest-rate cap on all consumer payday cash advances — that truly protects consumers. Many poor and financially illiterate members of our community are unaware of the problems taking out a payday loan can cause.

A study released in November by the Center for Responsible Lending, a national advocacy group, found that predatory lending costs American families $4.2 billion a year in excessive fees. In 2005, the report found, Arizonans paid $139 million in such fees. Griffith said that in the greater Tucson area, payday-loan borrowers spend at least $20 million on excessive fees.

“What we’ve learned from other states is that payday-loan reforms have brought dismal results,” Griffith said. “These changes are not going to help consumers, and they’re definitely not worth giving up the sunset provision.”

We agree.

We encourage state lawmakers to support strong legislation against predatory faxless cash advance lending even if a measure’s prospect of passing is slim. Lawmakers shouldn’t compromise with an industry that has brought financial ruin to many Americans.

Most important, legislators should not surrender the sunset provision that could free Arizona from the scourge of payday lending.

SOURCE: The Arizona Daily Star