In the Arizona Republic:

Mesa could get its wish to get rid of payday loan centers for good after a state Senate committee killed a proposed bill to keep them alive.

But Mesa City Councilman Dennis Kavanaugh fears the final chapter has not been written for the controversial small-loan centers, and warns payday opponents that the city’s long battle won’t be over until the legislative session ends.

“Stay tuned. This is one of those legislative issues where they’ll try to pull a rabbit out of the hat and the other opponents have to be ready for that,” he said.

The Senate Appropriations Committee voted 5-3 to scuttle H.B. 2370, which would have allowed payday lenders to continue offering high-interest short-term loans under new rules.

The fight over the legislation pitted Mesa’s two state senators against each other as committee Chair Russell Pearce pushed for the legislation and Sen. Chuck Gray advocated against it in a rare intraparty disagreement for Senate Republicans.

In Mesa, a number of payday loan centers, mostly on the city’s west side, cropped up a decade ago after the Legislature approved a 10-year exemption from the state’s 36 percent cap on interest rates.

That exemption expires June 30 after voters in 2008 rejected a state ballot proposition that would have given the payday-loan industry new life. During this week’s committee hearing, opponents like Gray argued that the voters’ wishes should be respected.

“They seemed to sprout like video stores all up and down Dobson Road. It seemed like they were on every commercial corner,” said Kavanaugh, whose district has a number of payday-loan centers and is represented in the state Senate by Pearce.

City Council put the brakes on that growth three years ago and required payday-loan companies to obtain a city use permit for any new store they wanted to open. Since then, the expansion of payday-loan stores has slowed.

“I won’t weep for them,” Kavanaugh said if the exemption expires and payday-loan centers are forced to leave. “Most of these operations are owned by companies that made millions on poor Arizonans, and put very little investment into the community. You don’t see them being a part of United Way or members of the chamber of commerce.”

Pearce had proposed, among other things, to reduce fees and the number of loans an individual could take out at one time. His bill also would have required 1.5 percent of the revenue from payday loan centers to go to community organizations. That provision was removed even before the bill was killed.

Pearce could not be reached for comment after his defeat, but state House Rep. Cecil Ash, a Republican who represents west Mesa, said killing the bill cuts jobs in Arizona and takes away rights.

“My personal view was that this action takes away the right of people to enter into a contract,” Ash said. “To me, that is a reduction in someone’s liberty. The purpose of government is protects the rights of an individual, not to protect people from their own decisions, wise or unwise.”

But Gray asserted, “It doesn’t violate a person’s right to contract.”

“All other financial institutions are able to profit using the 36 percent . . . cap. Payday-loan companies were given special favoritism. It should stop,” Gray said. “We should treat all financial institutions the same.”

Gray also disagreed with industry claims that payday-loan stores provide jobs and keep half-empty shopping strips filled.

“Should we fill empty buildings with other unsavory institutions? I don’t think so. I believe in a free market and I believe the owners of those properties will find another business.”

Gray said if payday-loan companies want to stay in Arizona, “they have to abide by the same rules.”

Republic staff writer Gary Nelson contributed.

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