Kingman Daily Miner reports:

Some stores will offer different services

KINGMAN – The clock is ticking for payday loan businesses in Kingman. With less than 48 hours to go before the law allowing them to do business expires, payday loan stores, both big and small, are preparing for a seismic shift in their business models.

The stores have been facing their demise all year, following failed attempts to woo voters and state lawmakers into extending the 2000 law that allowed them to charge upwards of 390-percent interest on small monetary loans. The law expires July 1, giving payday customers until Wednesday to either settle their accounts or face collection agencies.

For most major payday loan chains, such as the 1 Stop Check Cashing Payday and Title Loans at 3505 Stockton Hill Road, the loss of payday loans will not necessarily mean the end of business. 1 Stop is among several chains that plan to simply phase payday loans out of their model and turn to other services such as auto title loans, money orders and vehicle registrations.

But that hasn’t been the case for one major chain. Check ‘n Go stopped offering payday loans last month and has since announced the closure of all 34 of its Arizona locations by the end of summer. According to one employee, the local Check ‘n Go at 1949 Beverly Ave. is scheduled to close as early as the end of this week, following at least a dozen other locations around the state that have already closed this month alone.

In an interview with the Arizona Republic earlier this month, Check ‘n Go spokesman John Rabenold said the 36-percent interest rate cap imposed by the law’s expiration would simply make it impossible for payday stores to continue offering their product and still expect to survive financially. The same also goes for smaller, independently-owned payday stores, which are now considering other options, including following Check ‘n Go out of the state.

Dick Stephens of B-4 Payday is one of those independent owners. Stephens said he already closed his Kingman store at 3880 Stockton Hill Road on June 5, and plans to shutter his Bullhead City location after Wednesday. He said he plans to reopen his store by the end of next month in Laughlin, where Arizona’s new payday lending restrictions won’t apply. But he anticipated the move would not come without a cost, with the driving distance alienating a large percentage of his customer base.

“I’m assuming I’ll lose probably 60 percent of my business from Kingman,” Stephens said.

Stephens estimated he has serviced about 1,000 customers between Kingman and Bullhead City, the majority of them senior citizens on fixed incomes and lower-wage families trying to make ends meet.

“Most of our clientele is either retired seniors or working people who go week to week,” he said, adding that most of those clients have been scrambling to pay off their outstanding loans before the Arizona law expires. “It hasn’t been too bad. We’ve had a few problems, probably 5 percent of our clients have had trouble paying us off. But Terry Goddard’s been treating us like criminals, sending out warning letters threatening us with $20,000 fines if we do a loan past July 1.”

Attorney General Goddard has been among the state’s most vocal champions in favor of abolishing the payday loan industry, arguing that its sky-high interest rates and appeals to those already in precarious financial straits have done more harm than good to Arizona’s most vulnerable citizens over the past decade. As the payday law’s sunset date draws closer, Goddard, himself a Democratic candidate for governor, has launched a high-profile enforcement campaign dubbed “Operation Sunset” aimed at ensuring remaining lenders adhere to the ban on consumer loans that exceed the state’s annual percentage rate limit.

“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 in a statement June 9. “I encourage citizens to report violations to our office. Our enforcement will be swift and aggressive.”

Goddard has named auto loans, prepaid debit cards and online accounts as among the alternatives payday lenders have used to skirt the laws in other states that have outlawed the stores. One part of “Operation Sunset,” he said, will be to ensure these same practices don’t take hold in Arizona.

That’s been the experience for at least one local payday employee who preferred not to be named for this story. According to the employee, the lender she works at assured its customers they would be able to set up online accounts following the law’s sunset, only to receive a letter from Goddard’s office demanding they cease the practice. According to Goddard, as of Thursday, no business will be able to make payday loans over the Internet to Arizona customers, regardless of where that business itself is located.

At the same time, however, the payday employee said many customers are still seemingly unaware that the law is about to expire. In fact, customers are still coming in to attempt to renew their loans, and new customers are even coming in to seek first-time loans, not realizing the practice has all but ceased here.

But for all the short-term pain and confusion the sunset is likely to cause regular payday customers, advocates in favor of their abolition argue that the move will ultimately help pave the way for more traditional lending institutions to bridge the gap.

“I’m a believer that the market does address supply and demand pretty well on its own,” said David Higuera, political director for Arizonans for Responsible Lending, a 527 political action committee devoted to ending the payday practice. “The playing field right now is so uneven, it might as well be a wall, because payday lenders are operating under a completely different statute that only applies to them. It’s an attack on the free market, different rules for different lenders.”

With paydays gone, however, Higuera said traditional lenders are more likely to be willing to work with smaller, shorter-term loans, even though they may never be quite as flexible as the unsecured payday loans could afford to be. But even that may not necessarily be a bad thing.

“Payday lenders will always say they’re filling a need for short-term loans,” Higuera said.

“Research that’s been done nationally shows that 76 percent of payday loan volume nationally is based on churned loans to repeat borrowers. What that says to me is there is not the demand they want you to believe – the ‘demand’ is there because people are already beholden to them.”

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