In a thought-provoking editorial today, the Arizona Daily Star warns proponents of fair lending laws: The Fight is Not Over.  They’re 100% right.

Our view: Defeat of Prop. 200 was a setback for predatory loans, but Legislature could toss them a life preserver

Arizonans dealt a big blow to the state’s payday-loan industry in last week’s election. However, it wasn’t a death blow and we’re encouraged that activists for fair lending practices will remain vigilant in case the industry tries to persuade legislators to amend the law and keep predatory lenders in business after 2010.

Voters overwhelmingly rejected Proposition 200 by a 60-40 margin. The industry-backed initiative would have made small changes to payday loans, making them less onerous for consumers. However, the key provision of Prop. 200 would have done away with the July 1, 2010, expiration date for the law that allows payday lending, commonly referred to as the “sunset” provision.

The proposition’s defeat was particularly bitter for payday lenders considering they poured about $14.5 million into the campaign and were omnipresent on television and streets with ads and signs.

The industry doesn’t have many cards left to play, but play them they most assuredly will.

As Howard Fischer of Capitol Media Services reported in Tuesday’s Star, doing nothing is really not an option. Doing nothing means shuttering more than 700 payday-loan stores statewide and walking away from an enterprise that allows lending fees equivalent to 460 percent annual interest.

Lee Miller, the chief lobbyist for payday lenders in Arizona, told Fischer the industry hasn’t come up with a plan for what to do next.

Whatever it decides, the industry will find Arizonans for Responsible Lending, the grass-roots organization that helped defeat Prop. 200, waiting to counter. Fischer reported the organization is remaining intact.

“This predatory industry will pull out all the stops to try to circumvent the will of voters and protect their multibillion-dollar lending scheme in Arizona,” Kelly Griffith of Arizonans for Responsible Lending told Fischer.

In the industry’s favor, the Legislature might be taking a slight turn to the right.

Vote tallies are not final, but it appears Republicans, who have stymied efforts to restrict the industry in recent years, could possibly pick up two seats in the House and one in the Senate.

There’s also the possibility that Democratic Gov. Janet Napolitano, who opposed Prop. 200, could join President-elect Barack Obama’s administration. If that happens, Secretary of State Jan Brewer, a Republican, would assume the governorship.

However, a key opponent of payday lending, Sen. Debbie McCune Davis, D-Phoenix, is still in the Legislature and undoubtedly has gained some clout following Prop. 200’s defeat.

“The days of 400 percent interest rates are numbered,” McCune Davis told Fischer. “The people demand responsible lending laws.”

Whether the Legislature’s Republican leadership will want to spend political capital to support payday lenders when the public clearly does not remains in question. Prop. 200 failed in all 15 Arizona counties.

Miller, the payday-loan lobbyist, said Obama’s administration could also make the whole issue moot.

While campaigning, Obama promised to impose a nationwide cap on interest rates charged to borrowers similar to a 36 percent rate cap that Congress passed in 2006 to protect members of the military.

“We have a new president, a new Congress, which is likely to take a look at how lenders, in general, do business with consumers,” Miller said.

All in all, the future looks brighter for proponents of fair loans and gloomier for the payday-loan industry. The defeat of Prop. 200 was huge, but until predatory lenders actually start to close shops, it’s best to leave the champagne bottles corked.

To see the article online and post your comments, click here.