Prop 200 ads not telling whole story
by Howard Fischer – Capitol Media Services – Nov. 1, 2008

Jack LaSota is taping radio ads and phone messages urging Arizonans to vote for Proposition 200 saying that, as the former state attorney general, he knows “the payday loan industry needs to be reformed.”

But what LaSota does not disclose is that his law firm, Miller, LaSota & Peters, is the official paid lobbyist for the group of payday lenders that already has collected more than $13.4 million for Proposition 200, the main provision of which would keep the industry in business in this state.

In fact, it was Lee Miller, LaSota’s partner, who lobbied the Legislature last year to repeal a provision of state law that, if it remains in place, will put the payday lending industry out of business. When that failed, the lenders decided to go to the ballot instead.

And the pro-200 campaign itself has paid the firm of Miller, LaSota and Peters more than $8,500 for “professional services.”

In neither the radio ad nor the “robo calls” going to the homes of voters does LaSota mention that he never actually was elected the state attorney general. Instead, he inherited the job when his boss, Bruce Babbitt, became governor in 1978 after the death of Wesley Bolin and kept the post for less than two years.

LaSota did not return repeated phone calls to his office, home or mobile. Calls to Stan Barnes, who is managing the campaign, also were not returned.

Both the commercial and telephone calls are part of the industry’s campaign to convince voters that Proposition 200 would reform payday lending. The radio ad even says that the industry “needs to be stopped” and that the measure would “crack down on the payday loan industry.”

The only way listeners would know the commercials and phone calls are being paid for by the industry is if they know the “Arizona Community Financial Services Association,” the group listed as the source of funding, is the payday lenders’ organization.

“As the former chief law enforcement officer of our state, I can tell you with confidence that the payday loan industry needs to be reformed in order to better protect Arizona consumers,” LaSota says in the automated telephone calls.

He tells listeners Proposition 200 “has a number of tough reforms that will make payday loans better while preserving this financial option for those who choose to use it.”

In the commercial, LaSota says he supports the measure “because it will give the authorities the power to clean up the payday loan industry and crack down on the bad apples.”

Payday lending did not exist in Arizona before 2000. That year industry lobbyists convinced lawmakers to create a special exemption from the state’s legal cap of 36 percent annual interest on loans for “deferred presentment” transactions.

Borrowers can get up to $500 for up to two weeks by writing out a check to the lender for the amount sought plus $17.85 for each $100 borrowed. The lender agrees not to cash it for two weeks.

On an annual basis, that fee equals more than 450 percent.

Proposition 200 would cap that fee at $15 per $100, the equivalent of 391 percent.

But the key provision of the measure deals with that 2000 law exempting payday lenders from the usury cap.

Lawmakers, seeking to watch how the industry works, set it to self-destruct on July 1, 2010 unless reauthorized. When lawmakers refused, the lenders decided to ask voters to do what legislators would not.

Proposition 200 would make payday lending a permanent part of Arizona law and preclude the Legislature from ever imposing future restrictions. That’s because the state constitution bars lawmakers from altering anything approved at the ballot without first taking it back to voters.

The initiative does include some new restrictions on how the industry can operate, including prohibiting loans from being “rolled over” into new ones when borrowers cannot pay up at the end of two weeks.

It also would allow those who cannot pay after two weeks to get an extension for up to four paydays, or four months if the person is unemployed, with no additional interest if periodic payments are made on time. That, however, could occur only once a year.

The most recent financial disclosure reports show the industry has collected $14.6 million for the effort, making it the second most expensive campaign in state history.

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