PHOENIX Efforts by the payday loan industry to remain in Arizona after June 30 were dealt a serious and potentially fatal setback Monday when a key Democratic lawmaker said he can’t support what the lenders want.
|
|
Campbell’s vote is crucial: He is the lone Democrat on the House Banking and Insurance Committee who had previously indicated a willingness to approve allowing payday lending to continue despite the 2008 vote to have the industry disappear on July 1.
House Majority Whip Andy Tobin, RPaulden, who is sponsoring HB 2161 for the industry, told Capitol Media Services he will kill the plan unless it picks up at least some Democratic support.
That may be more of a necessity than just political cover in the Republicancontrolled Legislature: Several GOP lawmakers have told Capitol Media Services they will not support continued life for payday lending.
Tobin had the measure yanked from committee consideration Monday after it was clear he would not get bipartisan support. He said he will sit down with industry lobbyists to see what changes, if any, can be made to get some Democrats on board.
Campbell, however, said the industry has yet to offer anything that would help his constituents who represent large portions of south Phoenix.
One, he said, is a lower interest rate.
Payday lending involves twoweek loans of up to $500, with lenders now permitted to charge up to $17.85 for each $100 provided. That translates to more than 400 percent on an annual basis.
The special exemption for the industry from the state’s usury cap of 36 percent expires June 30. And voters, on a 32 margin, killed an industry sponsored initiative in 2008 to make that exemption permanent, even after lenders agreed to cut fees to $15 per $100 borrowed.
This new bill still has that $15 fee, about 390 percent on an annual basis, with a few other changes industry lobbyist say makes it a better deal for borrowers. Campbell, however, said that’s still too much and still not a good deal for borrowers.
Industry lobbyist Lee Miller said lenders cannot live with the 36 percent annual cap, saying that would never cover their costs on a twoweek loan for $100. Miller said he will consult with lenders to see if they can live with something less than 390 percent.
“After you pay employees, the health plan, pay the rent, pay the taxes, there isn’t a tremendous amount of money left,’’ Miller said. He promise to “engage with’’ Campbell to see what he can support to permanently keep payday lending alive in Arizona.
Campbell said only with “substantial changes’’ to the measure including the interest rate might he agree to support it. But even then, he said, it may be time to let payday lending go away.
“My community has spoken to me,’’ Campbell said. “They don’t want it there.’’
He was particularly miffed at what he said has been the industry’s lack of caring for the minority community he is AfricanAmerican and represents a community with many blacks and Hispanics at least not until their lobbyists needed Democratic votes.
“When it’s time for you to lose business, all of a sudden you find a new crop of friends,’’ Campbell said.
“And that’s what we turned out to be: a new crop of friends,’’ he continued. “You know how it works.’’
The key provisions of what the industry wants are identical to what voters defeated, including that $15 per $100 fee and a ban on “rollovers’’ which create a cycle of debt with borrowers paying off one loan by taking out another.
There are, however, some changes, including the right of borrowers to get out of the loan within two days without cost, new reporting to the state and a requirement for “plain language’’ in the contracts.
Comments
WZAFRA wrote on Mar 13, 2010 7:01 PM:
cindy09 wrote on Feb 4, 2010 9:05 AM:
Guest wrote on Feb 3, 2010 11:00 AM:
If you can afford to use them, great, but you're wasting your money. More often than not, you can't afford to use it and will fall behind. "
LOUIS GONZALES wrote on Jan 30, 2010 10:09 AM:
payday loan customer in AZ wrote on Jan 29, 2010 7:33 PM:
Scottie F wrote on Jan 29, 2010 9:36 AM:
If payday lenders are banned from Arizona, consumers are going to have to resort to more expensive options that hurt their credit in the long run; bouncing checks, high credit card interest rates and penalties, and so on. "
jkursman wrote on Jan 28, 2010 9:15 AM:
The vast majority of those who actually use the payday loan service aren't nor have they ever complained!
Why? Simply because at an average cost of $15-$17 per $100 borrowed, payday loans are often far less expensive than other short term loans, like the "overdraft protection loans" offered by banks and credit unions. More than 75% of account holders overdraft at least once annually at an average cost of $27 per $36 overdraft or $0.75 per $1.00 borrowed for four days. After this initial period, many banks charge an additional $5 to $8 per day on an overdrawn account.
Up to $128 in fees on a $100, 14-day loan from a bank or credit union vs. $15-$17 in fees on the same loan from a payday lender!
Which option is better for consumers? In a free market economy, consumers vote with the purchasing choices. If there were viable, less expensive alternatives, the short-term lender would cease to exist. Why are we restricting the availability of a family's often lease expesive credit option?!? "