The Sun Sets on Payday Loans in Arizona

Posted by AzBlueMeanie:

Jonathan "Payday Paton" did his best to give predatory lenders a new lease on life, but the voters rejected his machinations and now the payday loan industry has "sunset" under the law that permitted these predators to prey upon Arizonans. Good riddance. No more payday loans in Arizona – KGUN 9:

The sun has set on payday lenders in Arizona.  The 10-year-old law that allowed the businesses to charge interest rates up to 400% expired today at midnight.

Former Assistant Attorney General Vince Rabago spent five years fighting payday lenders.  Now, opponents like him are celebrating the long and powerful political battle that's putting an end to the industry.  "It's a great day for Arizona, effectively ending predatory lending by virtue of these payday loans," says Rabago.  "Arizona consumers will be better off without payday lending."

Still, opponents are concerned payday lenders could still offer other loan products, like auto-title loans.  Senator Debbie McCune Davis says, "The business of lending can continue but the protections of the Arizona Consumer Loan Act will prevail and interest rate caps of 36% will be in place. Businesses can lend but they have to do it and be fair to consumers."

Consumer advocate groups say those who owe will still have to pay off their loans under new arrangements.  For now, they'll continue moving forward helping thousands clean up their credit.  Kelly Griffith from the Center for Economic Integrity tells KGUN 9 On Your Side, "I'm elated for Arizonans for working Arizonans who's budgets have been taken for the last ten years have been taken down to this horrible spiral."    

The Arizona Attorney General's office has set up a hotline for people to report problems.  The Operation Sunset hotline number is 1-866-879-5219.

The Arizona Daily Star editorialized today Payday lenders may haunt us for a while longer:

We'd like to burst out with a chorus of "Ding-Dong! The Witch is Dead," but the end of legal, high-interest payday lending in Arizona isn't going to be quite so tidy.

The 10-year law that authorized usurious, three-digit loans expired on Wednesday. Arizona's 36 percent interest-rate cap – the "usury" cap – now applies to payday lenders.

But don't count on payday lenders to pack up their shops and slink out of the state.

Arizona Attorney General Terry Goddard told the Associated Press that lenders in other states have circumvented interest-rate restrictions by charging high rates on prepaid debit cards and sham automobile title loans.

Last month, Goddard launched "Operation Sunset" to pursue violators of the usury cap. It includes a task force, public education campaign and a consumer hot line. (above)

Goddard told the AP that about 200 lenders had already filed for licenses to make auto-title loans.

"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 told the AP.

Kelly Griffith of the Southwest Center for Economic Integrity in Tucson told the AP that her volunteers will be secretly visiting payday lending shops. They'll contact Goddard's office if they find violations.

* * *

Cincinnati-based Check 'n Go is closing all its 34 locations in the state, the AP reported. But, as Goddard noted, many others are not shutting down.

Let's hope Goddard's team, Griffith and her watchful volunteers, and others can identify and shut down those that find ways to violate the usury cap.

An Arizona sunset is a beautiful thing.