Tobin shelves payday loan bill due to lack of support

By Jeremy Duda, Arizona Capitol Times:

Two-dozen people who came to the Capitol Jan. 25 to oppose a bill that would allow payday lenders to continue doing business in Arizona left without saying a word. The bill didn’t last long enough in committee for them to testify.

Rep. Andy Tobin, a Republican from Paulden, pulled H2161 from the House Banking and Insurance Committee calendar due to a lack of votes. The bill would have changed the way payday lenders do business in Arizona, and it would have allowed the industry to continue operating after July.

All payday-loan businesses will be forced to close this year if the Legislature doesn’t pass a law to reauthorize the agreement.

Tobin said he had spoken to lawmakers from both parties who were supportive of the bill, and he thought it would have enough support to pass. But he later realized that the bill was bound for failure on the House floor.

“Clearly there is not enough support yet for this to be debated,” Tobin said at the committee hearing. “Right now we do not have consensus.”

Rep. Cloves Campbell, a Democrat from Phoenix, said he is now leaning toward voting against the bill because many of his constituents oppose the continuation of the payday loan industry. He had previously supported the idea of reauthorizing the industry.

“My community has spoken to me,” he said.

Opponents say payday lending should be eliminated because the high-interest loans trap people in a cycle of debt. Right now, the interest on a payday loan can reach nearly 400 percent. Other lenders, such as banks, are capped at 36 percent interest.

Payday loan supporters, however, say the lenders provide a service to people who need money but cannot qualify for a loan from a bank or credit union. Supporters also say abolishing the industry would put about 5,000 people out of work.

Tobin said he plans to work with industry representatives on an alternate plan that would allow payday lenders to keep their doors open.

“We have to find out here in Arizona if this industry can be regulated to the satisfaction of the consumer. And if they can, then we’ll be able to save jobs,” Tobin said.

David Higuera, political director for the anti-payday-loan group Arizonans for Responsible Lender, said the payday loan bill will probably be back in some form. He said he is concerned that the bill could return as a strike-everything amendment or as part of the budget bills.

“We’re not sure what will happen next, but we know that the industry has $150 million on the line,” Higuera said. “So they’re not going to go away without a fight.”

In 2008 voters rejected Proposition 200, an industry-sponsored ballot measure that would have allowed payday lenders to continue operating in Arizona while enacting new restrictions.

Rep. Robert Meza, a Phoenix Democrat, said the rejection of Prop. 200 sent a clear message about what voters think of payday loans.

“I’ve always consistently been against them. Arizonans do not want payday lenders in their neighborhoods,” Meza said.

Rep. Nancy McLain, who chairs the Banking and Insurance Committee, said she was disappointed that the bill didn’t get a hearing. The Bullhead City Republican said many of the bill’s opponents might not be aware of some of changes it made from Prop. 200. For example, she said, the bill caps interest at 15 percent for every $100 borrowed, doesn’t allow debt to roll over and would create a database so borrowers could take out only one payday loan at a time.

“I think they have a very definite niche that they fill for folks who don’t have a banking relationship for whatever reason, and can’t go into a bank and say, ‘I want an unsecured loan for $150 because I’ve got car repairs so I can get to work tomorrow.’ The banks aren’t going to do that,” McLain said after the hearing.

Opponents, too, wanted the bill to get a hearing. Kelly Griffith, of the Tucson-based Center for Economic Integrity, said people drove to the Capitol from as far away as Yuma, Prescott and Page to speak out against the bill, but they never got the opportunity. Griffith said she would have liked the debate to be heard in a public forum.

“It would’ve been very helpful for people that traveled very long distances to be able to enter their comments and give testimony,” she said.

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