Key Democrat on House panel voices opposition

by Howard Fischer, Capitol Media Services, in the Arizona Daily Star:

Efforts by the payday-loan industry to remain in Arizona after June 30 were dealt a serious – and potentially fatal – setback Monday when a key Democratic lawmaker said he won’t support what the lenders want.

Rep. Cloves Campbell, D-Phoenix, said payday lenders “haven’t been community-friendly . . . outside of doing business and taking money from us.” He added that the bill written by industry lobbyists still let lenders charge interest rates approaching 400 percent on an annual basis, which he said is unacceptable.

Campbell’s vote is crucial. He is the lone Democrat on the House Banking and Insurance Committee who had previously indicated a willingness to approve allowing payday lending to continue despite the 2008 public vote to shut it down on July 1.

House Majority Whip Andy Tobin, R-Paulden, who is sponsoring HB 2161 for the industry, said he will kill the plan unless it picks up some Democratic support.

Tobin needs Democratic votes to get the bill approved. Although Republicans control the Legislature, several GOP lawmakers have said they will not support continued allowance of payday lending.

Tobin had the measure withdrawn from committee consideration Monday after it was clear that he would not get bipartisan support. He said he will sit down with industry lobbyists to see what changes, if any, can be made to get some Democrats on board.

However, Campbell, who represents large portions of south Phoenix, said the industry has yet to offer anything that would help his constituents, starting with a lower interest rate.

Payday lending involves two-week loans of up to $500, with lenders now permitted to charge up to $17.85 for each $100 provided. That translates to more than 400 percent interest on an annual basis.

The special exemption for the industry from the state’s usury cap of 36 percent will expire on June 30. And voters, by a 3-2 ratio, killed an industry-sponsored initiative in 2008 to make the exemption permanent, even after lenders agreed to cut fees to $15 per $100 borrowed.

This new bill still has a $15 fee – about 390 percent interest on an annual basis – with a few other changes that payday lenders say makes it a better deal for borrowers.

Campbell, however, said that’s still too much, and it’s still not a good deal for borrowers.

Industry lobbyist Lee Miller said lenders cannot live with the 36 percent annual cap, saying that would never cover their costs on a two-week loan for $100. Miller said he will consult with lenders to see if they can live with something less than 390 percent.

“After you pay employees, the health plan, pay the rent, pay the taxes, there isn’t a tremendous amount of money left,” Miller said. He promised to “engage with” Campbell to see what he can support to permanently keep payday lending alive in Arizona.

Campbell said that only with “substantial changes” in the measure – including the interest rate – might he agree to support it. But even then, he said, it may be time to let payday lending go away.

“My community has spoken to me,” Campbell said. “They don’t want it there.”

He was particularly disturbed by what he said has been the industry’s lack of caring for the minority community until its lobbyists needed Democratic votes. Campbell is black and represents a district with many blacks and Hispanics.

“When it’s time for you to lose business, all of a sudden you find a new crop of friends,” Campbell said.

“And that’s what we turned out to be: a new crop of friends. You know how it works.”

The key provisions of what the industry wants are identical to what voters defeated, including the $15-per-$100 fee and a ban on “rollovers” in which one loan is paid off by taking out another, for an additional fee, which perpetuates a cycle of debt.

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