The Arizona House recently granted initial approval for a bill that allows payday lending companies to offer new services/products after being banned from operating the state via a 2008 initiative from voters in the state. The vote to approve the bill, which was introduced by Representative J.D. Mesnard, came hot on the heels of a lively debate.
The state democrats argued that voters in the state needed to have high interest rate loans banned from the state of Arizona when they decided to reject payday lending companies. Representative Debbie McCune Davis said that the existing bill, House Bill 2611, essentially allows what she calls “predatory lenders” the ability to return to offering their services in Arizona. Representative Davis said, “The community has been pretty clear in raising concerns about the return of predatory lending in Arizona. It’s not the community asking for this — it’s the lenders.”
Older payday loans in the state were issued when consumers gave a blank check to the lender, with the agreement that the lender would hold the check for a few weeks – until the borrower got paid at work. There were loan fees that were associated with those loans that some construed as having interest rates close to 400 percent per year. The new loans are now to be unsecured, but those against these types of loans state that lenders can get direct access to borrower’s bank accounts in order to automatically deduct payments. This is a standard form of payment that a wide variety of lenders use, but opponents seem to not want to allow payday lenders to make use of this technology.
Representative Chandler went on record saying that the new loans give people with low credit scores the ability to borrow money when unexpected bills or expenses pop up. He said that if these new “flex loans” were not allowed it may be because some people could take on too much debt and that would make for a negative situation, but is not how the majority of borrowers would borrow money.
Representative Mesnard had this to say, “I think it’s interesting that we are assuming in most of the arguments here as I hear them that people are stupid. That they can’t make decisions, so we have to make them for them. But if just because some people make bad decisions we’re going to remove a product for everybody, that’s not the right public policy. We’ve tried that – we’ve tried that with drinking.”
Back in 2008 voters rejected a proposal to extend the law that allows payday lenders to operate in Arizona by an almost 2 to 1 margin. This move forced lenders to shut down and they have had trouble getting lawmakers to approve entry for lenders ever since.
Current laws now put a cap on the interest rates of loans at 36 percent each year, plus a flat rate of $150 per loan. The new legislation, which includes interest rates and daily fees, comes close to 200 percent interest, according to analysis from the Consumer Federation of America.
The new law is being backed by a payday lending group called the Arizona Financial Choice Organization. Many of the folks from this organization spent $15 million in their failed 2008 bid to allow them to continue operating in the state of Arizona. If this current bill is officially approved in a House vote, it will then move on to the Senate for immediate consideration and action.

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