The Arizona legislature approved a bill that gave money lender 10 years of authorization to operate within the state in June 2000. In November of 2008, Arizona voters defeated a ballot proposition that would have permanently extended this authorization. On June 30, 2010, all payday loan company in Arizona will no longer be able to operate legally.
Arizona new lending limits
Lenders could have new regulations June 30, 2010. All loans, including any of the installment loans, could be limited to 36 percent interest plus 5 percent for administrative expenditures. Auto title lending and prepaid debit cards are two varieties of short term credit that will still be available to customers in Arizona. The Arizona attorney general has set up a Facebook page where they’re encouraging citizens to report any lenders they believe are operating outside the new legal framework.
The effect on personal loan companies in Arizona
Currently, there are 75 companies in Arizona with licenses to operate payday loan stores. There are 650 operating locations. Of those storefront locations, about 200 have filed applications to convert their licenses to automotive loans businesses or pre-paid debit card businesses. Some companies have indicated that they plan to stay open and will try to offer short-term credit at the 36 percent interest rate cap. Nevertheless, most stores will shut down. This means approximately 1,000 lost jobs within the state. The Arizona Operation Sunset representatives explained the Attorney General could be scrutinizing the terms and conditions of all short-term credit transactions.
The financial reality of payday lenders in Arizona
Arizona’s Operation Sunset says that by forcing personal loan companies out of business within the state of Arizona, it is helping improve the financial stability of state citizens. A recent study by UC-Davis found that any short-term credit is simply too expensive and risky for banks and credit unions to offer. Short-term credit markets often provide businesses the money to pay their bills, make payroll and also the money they need to operate on a day-to-day basis. Similarly, the check cashing and other financial services that many payday lenders offer are very useful for many individuals, including those who can’t or choose not to have bank accounts.
Citations
AZCentral.com
azcentral.com/arizonarepublic/local/articles/2010/06/10/20100610payday0610.html
Arizona Attorney General’s Office
azag.gov/operation_sunset/
Associated Press
google.com/hostednews/ap/article/ALeqM5hd4oR9WzL2f3xLfVj38DYSFLPJkQD9G83P9O0
