OUR VIEW: Voters have said they want usurious lenders out of Arizona, but some lawmakers keep trying to let them in

It was only a matter of time before someone turned the nation’s credit crisis on its head and made the case that offering consumers high-interest loans is actually a good thing.

That’s what some state lawmakers are doing this week as they try to promote legislation that would allow companies to offer expensive loans that would be exempt from the state’s 36 percent usury cap.

Thankfully, House Bill 2608 didn’t make it out of committee Monday after Rep. Doug Quelland, R-Phoenix, went against his fellow Republicans in the House Banking and Insurance Committee and voted against the measure. Quelland’s vote created a 4-4 deadlock, which derailed the bill, at least temporarily.

Before opponents of predatory lending could even catch their breath, the measure was revived as House Bill 2071 and will get a hearing today in the House Transportation and Infrastructure Committee.

Why would a financial bill go to a transportation committee? It appears to be a simple case of shopping for a friendlier crowd.

The measure’s sponsor, Rep. Andy Biggs, R-Gilbert, is chairman of the Transportation Committee. Assuming that the panel’s three Democrats vote against the measure, it will be up to a Republican to make a principled stand – a la Quelland – on behalf of Arizona consumers.

One of those Republicans, Nancy McLain, R-Bullhead City, already voted in favor of the measure as a member of the banking committee. That means Frank Antenori, R-Tucson; Judy M. Burges, R-Prescott; or Sam Crump, R-Anthem, are the best hopes for sidelining this legislation that will make the rich richer and the poor poorer.

Given Arizona’s history with payday loans and voters’ desire to run predatory lenders out of the state, it’s shameful that some lawmakers still want to give out-of-state special interests a way to separate consumers from their hard-earned dollars.

Last fall, voters overwhelmingly rejected, by a 60-40 margin, Proposition 200, which would have allowed payday lenders to do business in Arizona indefinitely. The state law that allows payday loans is set to expire in 2010.

HB 2071 would allow for a new type of consumer loan ranging from $200 to $3,000. While the cost of these loans wouldn’t approach the effective interest rates of payday loans- which reach up to 400 percent – they could still have interest rates of more than 100 percent.

Biggs introduced a similar measure last year that failed.

Biggs conceded to Capitol Media Services’ Howard Fischer that the interest rates for the proposed loans are high. He said the rates are justified because such loans have a high default rate.

The fact that many borrowers are defaulting on the loans should raise some red flags. Lawmakers ought to remember that the credit crisis was caused, in part, by lenders giving home loans to people who couldn’t afford them.

As we editorialized last year when Biggs introduced a similar bill, these loans are a bad idea. They’re not as bad as payday loans, but they have the same potential to hurt borrowers as much as help them.

The state’s usury cap was created for a reason – to keep unscrupulous lenders from victimizing unsophisticated borrowers who don’t realize that high interest rates can become so burdensome that it becomes almost impossible to repay a loan.

Creating bad loan products will do little good for Arizona consumers or its economy.

“Throwing more bad credit options on top of already bad credit options is not a logical solution to the economic retraction in our local communities, state and country,” Kelly Griffith, outreach director for Arizonans for Responsible Lending, which is fighting HB 2071, told us Tuesday.

We encourage all lawmakers, particularly those in the majority like Antenori, to reject this bill – again.

When money is tight, consumers don’t just need credit options, they need good credit options.

CONTACT YOUR LEGISLATORS • Track legislation and get in touch with lawmakers through the Web sites www.azhouse.gov and www.azsenate.gov

• Call the Tucson legislative office at 398-6000.

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