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AZ Payday Lenders in Last-Ditch Bid to Avoid Rate Cap

January 14, 2010

PHOENIX - The payday loan industry's exemption from Arizona's 36-percent usury law will end, or sunset, June 30 unless state lawmakers act. The short-term lenders, who charge up to 460-percent in interest annually, argue they provide a necessary service.

But, Arizona Sen. Debbie McCune-Davis, co-chair of Arizonans for Responsible Lending, says when North Carolina banned payday loans, it created more choices for borrowers.

"What happened in those communities is other forms of community-based lending came in to the marketplace, and consumers had access to more options, and they did it within the interest rate."

In the 2008 election, 60 percent of Arizona voters rejected a ballot measure that would have given payday loan stores a permanent exemption from usury limits.

The 2008 initiative was billed as a reform measure. Payday lenders are proposing a number of similar reforms this year, such as limiting two-week loan fees to $15 per $100 borrowed, and capping total loans to a single borrower at $500. McCune-Davis says those proposed reforms still would result in outrageous interest rates.

"The reform legislation that's being proposed protects the 391-percent interest rate. So, if the industry does not sunset, then that 391-percent interest rate would be permanent in the law."

The payday loan industry says losing its usury exemption will cost Arizona thousands of jobs and millions in tax revenues at a time when both are sorely needed. McCune-Davis disagrees.

"We don't believe those jobs are going to go away. Many of these companies do other things besides offer payday loans. They do check-cashing, they do title-lending. We think that the numbers are overstated and the impact in the community is far less than what's being described."

Currently 15 states and the District of Columbia have outlawed payday lending.

Doug Ramsey, Public News Service - AZ