Pay Day Lending On the Way Out
Phoenix, AZ – Payday loans have been legal in Arizona for a decade, operating
under a special exemption from laws which generally cap interest
at 36 percent a year. The fees on the two-week loans can hit
$17.85 for every $100 borrowed, which translates out to an APR
north of 400 percent. Only thing is, that exemption expires June
30. Voters rejected an extension two years ago as did lawmakers
earlier this year. And a last minute offer of loans at a somewhat
lower rate didn't fly. That means no more payday loans beginning
in July. The move is a victory for Sen. Debbie McCune Davis who
said Arizonans don't need the short-term high interest loans.
(What will replace it will be loans through lenders with whom
they have relationships. And they will help people get
appropriate loans and help them work their way out of debt.)
That still leaves the question of what happens to those who don't
have a regular relationship with a bank or credit union.
(That's not the issue here. What we're talking about is people
who do have relationships with lending organizations,
particularly credit unions, who will make products available.)
The move doesn't necessarily mean all 650 sites making payday
loans will shutter. Some offer other services like check cashing
and vehicle registration renewals. For Arizona Public Radio this
is Howard Fischer.