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Arizona Lawmakers Consider "Payday Lending" Bill

GRAPHIC: Opponents say a bill moving through the Arizona Legislature could result in consumers paying the equivalent of a 218 percent interest rate on a loan. Graphic credit: The White House.
GRAPHIC: Opponents say a bill moving through the Arizona Legislature could result in consumers paying the equivalent of a 218 percent interest rate on a loan. Graphic credit: The White House.
March 19, 2015

PHOENIX - The Arizona State Senate is considering a bill, already approved by the House, which opponents say could allow payday lenders to issue loans with costs equaling an annual interest rate of more than 200 percent.

Cynthia Zwick, executive director with the Arizona Community Action Association, says House Bill 2611 would create "flex loans" which would allow lenders to charge undisclosed fees.

"But then they're allowed to charge customary fees under this legislation, and customary fees are undisclosed," says Zwick. "So, the fees added to the interest get up to 218 percent a year, on one of these loans."

Zwick says the bill is an attempt by the payday loan industry to bypass state law which caps interest rates on loans at 36 percent. She adds, a consumer who borrows the maximum $3,000 permitted under HB 2611 would end up repaying more than $13,000 on a five-year term.

Supporters, including the bill's sponsor Representative J.D. Mesnard, say it could help people who need money and can't get conventional loans.

"These folks are in a situation where they don't have access to credit," says Mesnard. "They can't qualify in the more traditional means or whatever, they find themselves in a pinch."

The U.S. Defense Department reports that predatory lenders target military personnel because they are often young and financially inexperienced borrowers who have bank accounts and steady jobs, but also have little in savings, flawed credit or have hit their credit limit.

Troy Wilde, Public News Service - AZ