On KTAR:

PHOENIX — Arizona Attorney General Terry Goddard told payday lenders Wednesday they cannot keep operating as usual after a law authorizing their existence expires June 30.

The 2000 law allowed payday lenders to operate for 10 years, exempt from Arizona’s cap on annual interest rates of 36 percent. Interest on some loans was as much as 400 percent, critics said.

The lending industry tried, but failed to convince voters and the Legislature to extend the exemption.

Goddard said that means no more high-interest payday loans.

He expressed concern that the lenders will try to get around the new restrictions.

“We believe that a lot of people already are telling their customers to shift to auto title loans, even if they don’t have a car,” he said.

He said those activities are a sham.

Legitimate loans taken against a car title will be legal, along with check cashing operations.

Goddard, standing outside a payday lending store in central Phoenix, said some of the loans held by such stores “are being rolled into a series of loans which, in fact, are fraudulent. So we’re going to be on top of this. The attorney general’s office is going to be watching these transactions.”

He added, “We are encouraging people who are approached, especially in this rollover time, right now at the end of the time that they are in business, to report to us quickly when they see any evidence of the very, very high interest consumer loans continuing in Arizona.”

There are about 650 payday loan stores in Arizona. Executives have said some will stay open and try to make a profit from other lines of business, including auto title loans, check cashing and prepaid debit cards.

(Copyright 2010 Bonneville International Corporation. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP contributed to this report.)

The Associated Press:

Arizona Attorney General Terry Goddard on Wednesday warned payday loan stores not to try to keep operating as usual after a law authorizing their high-interest loans expires at the end of the month.

Speaking in front of a payday loan center in Phoenix, Goddard said he is initiating a plan to aggressively pursue violators.

A task force, a public education campaign and a consumer hot line are all part of Goddard’s efforts to enforce the changes, an effort he calls “Operation Sunset.”

The state law allowing payday lenders to operate for 10 years expires June 30. The lending industry tried but failed to persuade voters and the Legislature to extend the authorization.

Payday lenders write checks for short-term loans while charging fees that amount to interest rates of more than 400 percent on an annual basis.

When other states have tried to restrict the payday loan business, lenders have bypassed regulations by continuing to charge high interest rates and fees on loans marketed as prepaid debit cards and sham auto-title loans, Goddard said.

“Over 200 of the payday lenders in operation today have filed to convert to a license that will allow them to make auto-title loans,” Goddard said. “We believe that a lot of people are ready by telling their customers to shift to auto-title loans, even if they don’t have a car.”

Goddard said his office will try to ensure illegal lending does not occur by looking past labels used by loan companies and examining the actual transactions.

The attorney general’s office will also watch for payday lenders that try to operate on the Internet, Goddard said.

There are about 650 payday loan stores in Arizona. Executives have said some will stay open and try make a profit from other lines of business, including auto-title loans, check cashing and prepaid debit cards.

It won’t be easy to get payday lenders out of the state, Goddard said.

“This is a vigorous and well-funded opponent, and they’re going to try to keep their foothold in Arizona,” he said.

Calls Wednesday to representatives of the payday loan industry in Arizona were not immediately returned.

The toll-free number for Goddard’s payday lending hot line is 866-879-5219.

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Attorney General Terry Goddard today announced the formation of “Operation Sunset”, an enforcement initiative of the Office designed to aggressively pursue payday lenders who attempt to evade the ban on payday loans. The Office will take action against any payday lenders that continue offering loans with illegally high interest rates after the law expires on June 30.

“I will use every tool at my disposal to enforce the end of exorbitant payday loans in Arizona and seek fines and penalties against those who try to continue this abusive practice,” Goddard said. “I encourage citizens to report violations to our Office. Our enforcement will be swift and aggressive.”

Goddard noted that other states, such as North Carolina and Arkansas, have seen deceptive practices following changes in their laws that ended payday loans. Auto loans, pre-paid debit cards and Internet payday lending are alternatives used by the payday loan industry elsewhere to evade the law. For example, pre-paid debit cards have been offered with an interest rate and fees that would exceed Arizona’s annual percentage rate limit of 36 percent.

“We are grateful to Attorney General Goddard for keeping up the good fight to eliminate this industry and support the people of Arizona and their neighborhoods,” said Bishop Henry L. Barnwell, pastor emeritus of First New Life Baptist Church in Phoenix.

“It’s about time the payday loan industry be forced to follow the same rules as all other lenders when making their short-term loans,” said Sunnyslope community leader Christina Plante. “The job of the people isn’t over yet. It will still be our responsibility to work in partnership with the Attorney General’s Office to identify anyone charging triple-digit interest rates.”

The Attorney General’s Office is sending payday loan companies a letter informing them of the “Operation Sunset” initiative and his commitment to vigorously enforce Arizona’s consumer protection laws.

If consumers see violations of the law, they should call the Office’s dedicated Operation Sunset phone line at 1-866-879-5219 or email our offices at operationsunset@azag.gov . They can also visit Facebook at http://www.facebook.com/operationsunset .

Attached is the “Operation Sunset” letter that will be sent to payday lending institutions. For additional information, contact Press Secretary Molly Edwards at 602-542-8019.