AZ Payday Loans End After Tomorrow
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June 29, 2010
PHOENIX - Payday loans with interest rates topping 400 percent become illegal in Arizona at midnight Wednesday, after voters rejected a 2008 ballot measure to extend the industry's 10-year authorization to operate.
State Senator Debbie McCune-Davis of Phoenix helped defeat last-ditch efforts to reverse the election results in the legislature.
"Voters were given the opportunity to make a decision about whether payday lenders continue to operate at outrageously high interest rates or change their practices to come under the 36 percent usury law. The voters were very clear about it, and now it's happening."
McCune-Davis calls ending payday loans "a victory for the people of Arizona." Payday lenders say they can't cover operating costs with a 36 percent rate cap, and several payday loan stores have already closed.
Lenders say they were providing a necessary service, but McCune-Davis says people have other options for small, short-term loans.
"We would recommend credit unions. We would recommend charities. We would recommend short-term borrowing from a family member who will not gouge you."
She says many credit unions offer low-dollar loans at interest rates of 12 to 18 percent.
McCune-Davis says most of the business for payday lenders involves making new loans to pay off old loans, with fees added for each transaction.
"When payday lenders aren't on street corners with neon lights and open 24 hours a day, people will go to legitimate lending institutions or to people who can help them. And they will get solutions to their financial problems that don't leave them deeper in debt."
At the peak of payday lending business, there were 715 loan stores in Arizona.