http://stream.publicbroadcasting.net/production/mp3/knau/local-knau-880146.mp3
Phoenix, AZ – State law limits lenders to charging interest of no more than 36
percent on an annual basis. But a decade ago legislators agreed
to an exemption for what are technically called deferred
presentment transactions. In essence, a borrower provides a check
for up to $500 plus a fee of up to $17.85 per $100 borrowed. The
lender provides the cash, minus that fee, agreeing to hold the
check for up to two weeks at which time there is supposed to be
enough in the account to cover it. That fee translates out to an
annual percentage rate of more than 400 percent. But lawmakers,
cautious about the new loans, agreed to only a temporary trial:
The legal exemption from that 36 percent interest cap disappears
June 30. The industry sponsored an initiative in 2008 to make
that exemption permanent. But it was defeated on a 3-2 margin
despite a $14 million campaign by lenders. Now Rep. Andy Tobin of
Paulden has agreed to sponsor a bill on behalf of the industry to
do what voters would not.
(My concerns existed with those people who are losing their jobs,
with those folks who are likely going to not be making their rent
when this thing happens.)
And Tobin said this is a far better regulatory plan than the one
voters rejected.
(Voters were right to be suspicious and right to be concerned by
this industry. And I think I would suggest that before you make a
decision on whether this is right or not, you should look at the
bill and see how harrowing this regulation is on this industry.)
In fact, though, much of what is in Tobin's bill is identical to
what voters turned down. For example, the ballot measure proposed
capping fees at $15 for every $100 borrowed, which translates to
an effective annual interest rate of about 390 percent. That's
the figure in Tobin's bill. The initiative would have repealed
existing law which allows borrowers to roll over a loan up to
three times. Ditto for what Tobin is proposing. And both measures
ban lenders from charging borrowers more than twice for the same
bounced check, and give borrowers who can't repay the money at
the end of the loan a payment plan, without interest, to come up
with the money. There are some differences. Tobin's bill would
require lenders to use a -- quote -- commercially reasonable
method to verify that an applicant for a new payday loan does not
have an outstanding one somewhere else. And borrowers would be
able to back out within two business days without owing anything.
The industry's efforts to keep payday lending legal despite that
2008 vote are getting mixed reaction among Republicans who
control the Legislature. Rep. Michele Reagan said people are
concentrating too much on that 390 percent interest rate. She
said they should instead look at the charges like a fee -- one
that can be less than what a bank imposes for a bounced check.
(So, I mean, if you need a bag of groceries and your two options
are go write a bad check or go to one of these places, it's
actually a benefit and cheaper to go to... I still don't
understand where people think the costs are so exhorbitant if
they actually go and see the dollar value.)
But Rep. Frank Antenori said he wants the industry to disappear.
(I saw what they did to my soldiers when I was in the military in
North Carolina. And that's why North Carolina banned them. And
that's why the Army made it a court-martialable offense to use a
payday lender if you were on active duty. Because they
relentlessly get you into a cycle of having to come in, renew
your loans, pay the fees. And it goes round and round and buries
people.
Antenori said the fact Tobin's bill would not permit loan
rollover does not make it any more acceptable. He said lawmakers
should work with banks and credit untions to provide high-risk,
short-term loans with a reasonable interest rate, something hbe
defines as less than 40 percent a year, with a requirement for
anyone who takes one of these loans to complete a financial
literacy course. For Arizona Public Radio this is Howard Fischer.