A new kind of payday loan?
Phoenix, AZ – State lawmakers are balking at a proposal that would replace
payday lending with another type of high-interest loan.
State law caps interest at 36 percent a year. And voters decided
in November to kill the exception for two-week payday loans which
have an annual percentage rate of more than 400 percent. This new
type of loan could be from $200 to $3,000 for up to 24 months.
Rep. Andy Biggs said that can translate to an APR in the 100
percent range. He said there's nothing wrong with that -- if
people know what they're getting into.
"There are many people who think that individuals living in our
country today are incapable of making decisions for themselves.
There are many people who think that government ought to make
many of these decisions that affect their lives, for good or ill.
And it's my position that I don't know more than anybody else in
this room on how each one of them should live their lives."
But Kathy Jorgensen of St. Vincent de Paul said sometimes
government needs to protect people from getting trapped in a
cycle of debt.
"And I understand that nobody forced them to do it. But
desperate, financially unsophisticated people make bad
The House Banking and Insurance Committee killed the bill Monday
on a tie vote. But industry lobbyists already are looking for
ways to resurrect it.