Monday, February 14, 2011
Seriously? Payday loans again? I guess there's always lobbyist money hanging around to get things done in Phoenix.
Saying the demise of payday lending left a gap, a veteran legislator is proposing a new kind of consumer loan, one with higher interest rates than now allowed.
Rep. Jim Weiers, R-Phoenix, said the 2008 decision by voters to kill payday lending in Arizona left a "huge void" in the market, particularly for people whose credit history does not give them access to more traditional sources of borrowing. What's left, he said, is having to pawn some items or going to an unregulated and illegal loan shark.
But Rep. Debbie McCune Davis, D-Phoenix, said what Weiers is proposing in HB 2550 is little better than the high-interest, short-term loans that voters rejected.
"The bill is just one more form of predatory lending," she said. "The sponsor of the bill seems to have missed the election in 2008 when the voters said ‘no' to triple-digit interest rates."
The measure is set for a hearing Wednesday before the House Commerce Committee, which Weiers chairs.
Arizona law generally caps interest on loans at an annual rate of 36 percent.
In 2000, though, legislators agreed to create an exception for what were technically called "deferred presentment transactions."
A borrower would write out a check that the lender, knowing it could not be covered now, would agree not to cash for up to two weeks in exchange for a fee of $17.85 for each $100 borrowed.
That translated out to an annual percentage rate of more than 400 percent.
That 2000 law, however, provided for only a 10-year experiment. Lawmakers refused to extend the law and a heavily financed initiative by the payday lending industry also fell short.
The lenders shuttered last June 30.