Payday lenders fight to stay in AZ
Today’s Arizona Daily Star Front Page:
Unwilling to go away without a fight, the state’s payday lenders are trying to persuade lawmakers to let them stay in business despite a public vote to the contrary.
The industry has retained the services of former state Attorney General Grant Woods. He said that, after studying a proposal for a new lease on life by lenders, he’s convinced that there’s a role for payday lenders.
They have their work cut out for them.
By a 3-2 margin last year, Arizona voters rejected an industry-crafted proposal to repeal the law that prohibits them from remaining in business beyond June 30, 2010. That defeat occurred despite the industry’s pouring more than $14.7 million into the campaign; foes spent less than $1 million.
But industry lobbyists pushed through a special law in 2000 allowing them to charge fees that far exceed the cap for what are called “deferred-presentment transactions” of up to $500.
In essence, someone who needs money for a few weeks writes out a check for that amount plus the fee, which can be up to $17.85 per $100 borrowed. The company agrees not to cash the check for up to two weeks.
That computes out to an annual percentage interest of more than 450 percent.
Efforts by industry lobbyists to persuade lawmakers to remove the sunset failed, even when the industry offered concessions such as preventing “rollovers” to prevent that original $500 two-week loan from being refinanced time after time, with ever-increasing fees. That led to the failed ballot measure.
Woods said he never thought much of payday lenders before being asked to help build support for keeping them around. Woods said, though, that the lenders have agreed to a series of changes that make him comfortable working on their behalf.
But state Sen. Debbie McCune Davis, D-Phoenix, said much of what they are offering now was in the industry’s 2008 measure, the one voters found unacceptable.
Woods said that interest figure, while technically accurate, is misleading.
“These are two-week loans, not annual loans,” he said, with about 94 percent of borrowers paying them off within that time.
Woods said no lender would be willing to provide a two-week, unsecured loan at the 36 percent annual limit, because that would generate just a few dollars to cover costs and profit.
“I don’t know any industry, any business, any bank, anybody who will give you 60 days, no fee, no interest,” he said.
But that, too, was in the industry-financed initiative that voters rejected.
And McCune Davis said so were other changes that Woods is touting as improvements, including the prohibition on rollover of existing loans and a method of ensuring that borrowers at one payday lender don’t already have outstanding loans from another.
Woods said the fact that so many consumers use payday loans shows there is a need for short-term loans for people who have expenses but have no collateral.
She said there were lenders who lent money under the old 36 percent interest cap but were driven out of business when payday lenders arrived. McCune Davis said they will come back.
And for those who can’t qualify, McCune Davis suggested relatives, friends and charities.
That presumes the lenders will go away.
Other states that ban payday loans, though, have enacted separate laws also making Internet-based transactions illegal.
Any measure approved during the regular legislative session does not take effect until 90 days after the end of that session. With lawmakers at the Capitol until May — if not beyond — legislation reauthorizing the right of payday lenders to operate would not take effect until months after they were forced to shut down.
That leaves two options [for the lenders]: Get the necessary two-thirds vote for an emergency, which could prove difficult given the recent public vote, or persuade Brewer to call a special session to deal with the issue.
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