Friday, August 8th, 2008...6:40 pm
Fate of Payday Loan Stores on Ballot this November
Registered voters within Colter Commons are receiving mailers encouraging a “yes” vote on the Payday Loan Reform Act, which will appear on our ballot this November, from the measure’s sponsoring group, Arizonans for Financial Reform - Yes on 16. Among other things, the mailer suggests a yes vote will reduce the number of payday loan store-front locations.
I heard a few grumbles when a second payday loan store opened within neighborhood bounds, so I decided to read up on the initiative and share my research. I am not a trained journalist, so I’m providing links to my sources so you can read them yourself. You can also just skip to my conclusion. Disclaimer out of the way, here is what I learned:
From Big money driving Ariz. Ballot initiatives by Matthew Benson - Jul. 30, 2008, The Arizona Republic
… nearly every cent of the $8.7 million dumped into a ballot effort benefiting the payday-loan industry has been donated by - guess who? - a trade group representing payday lenders: the Arizona Community Financial Services Association.
From Facing ban, payday lenders look to voters by Craig Harris, May 24, 2008, The Arizona Republic
Arizonans for Financial Reform, which has received nearly $2 million in contributions from payday lenders, wants voters to remove a provision in state law that would force the industry to close in 2010.
In return, payday operators would lower fees, provide a repayment plan with no additional cost for borrowers behind in payments and ban loan extensions, which are lucrative for lenders.
Payday-loan reforms
The payday-loan industry is offering a handful of changes in the way it does business in Arizona as part of a reform initiative it hopes to get on the November ballot. The proposals include:
- Eliminating a state law that would shut down the industry in 2010.
- Capping fees at $15 per $100 borrowed compared with the current limit of $17.65 per $100 borrowed. The borrowing limit would remain at $500.
- Stopping loan extensions. Currently, loans can be extended up to three times, with additional fees per extension.
- Creating a no-additional-cost repayment plan that could last up to four months.
- Requiring the state to create a database that lenders could use to ensure that a borrower had no outstanding debts to other payday lenders.
From Springing the Debt Trap a study published December 13, 2007, by the Center for Responsible Lending
90 percent of payday lending business is still generated by trapped borrowers with five or more loans, even in states that have attempted reform
The same study found that none of the following reform measures included in the proposed Payday Loan Reform Act have been effective in other states that have tried them:
- renewal bans
- limits on number of loans outstanding at any one time
- payment plans
- databases which enforce ineffective provisions
- regulations that narrowly target payday loans
Instead the study found that only enforcement of a comprehensive interest rate cap at or around 36 percent for small loans has solved the debt trap problem.
Video from KAET’s Horizon April 14, 2008
Host: Ted Simmons, Guests: Arizona State Senator Debbie McCune Davis and Stan Barnes from Arizonans with Financial Reform, Link to transcript.
Links to Further Information
- Basic primer: Measures on the 2008 statewide ballot July 5, 2008, The Arizona Republic
- Ballotpedia.org covers both sides with brief, concise summaries and linked references: Arizona Payday Loan Reform Act (2008)
- Full text of the initiative (PDF)
- State of Arizona Campaign Finance Report, Arizonans for Financial Reform Yes on I-16-2008, Committee #: 200810093 (PDF)
- Web site paid for by Arizona Community Financial Services Association, in other words, the payday loan industry: www.affr2008.org
- Opposing the measure: StopPaydayPreditors.com
Interesting tidbit I haven’t seen reported anywhere
I reviewed the Campaign Finance Report and noticed several individuals received payments of $500 for Professional Services - Other.
On a whim, I Google-mapped their addresses with the search parameter payday loan near {payee address}
. The results are displayed below without revealing exact payee names and addresses. I threw in search results for our neighborhood, too, for comparison.
Payee City & Zip |
Payment Date |
Payday Loan Sites
|
Payday Loan Sites
|
| Chandler 85286 |
4/23/2008 | 2 | 159 |
| Mesa 85208 |
4/23/2008 | 4 | 51 |
| Glendale 85303 * |
4/23/2008 | 2 | 164 |
| Glendale 85303 * |
4/23/2008 | see previous | see previous |
| Scottsdale 85256 |
4/24/2008 | 0 | 195 |
| Whiteriver 85941 |
4/24/2008 | did not look up because payee address is a PO Box | |
| Scottsdale 85251 |
4/24/2008 | 7 | 226 |
| Glendale 85305 |
4/28/2008 | 2 | 151 |
| Avondale 85323 |
5/22/2008 | 11 | 28 |
| Mesa 85210 * |
5/29/2008 | 15 | 270 |
| Mesa 85210 * |
5/29/2008 | see previous | see previous |
| Phoenix 85014 + |
8/1/2008 | 24 | 335 |
| * indicates two different payees with same surname listed at same address + search centered on 10th St. & Colter for comparison |
|||
Based on her name and city, I believe one of the payees is the person whose photograph and testimonial appear in the mailer. My feeling is the other payees were approached at payday loan stores, and paid for the favorable testimonials shown in the video on the mailer website. It’s conjecture at the moment. But if I were standing in a payday loan store with a choice between a high-interest loan and a shot at earning $500, I know which I would choose.
My Own Conclusion
The proposed Payday Loan Reform Act would reduce the fee on a $100 payday loan from $17.65 to $15 and the APR from 460% to 391%, and keep the payday loan industry operating in Arizona. The Act was introduced to counter the Ban Payday Loans initiative, which failed to get enough signatures to appear on the November ballot. If approved by voters, the Payday Loan Reform Act will be extremely difficult for the Legislature to repeal or amend due to Arizona’s Voter Protection Act.
I read the full text of the initiative and found no specific language about number of store-fronts permitted. It seems the flyer’s claim there will be fewer stores relies on vague language that operators must be honest and upstanding, with no clear definition of what that means or how it is to be enforced.
I also note the Act will require the State to establish a payday loan database, but provides no means of paying for servers, staff or infrastructure to create and maintain it, meaning taxpayers will pay for it.
Bottom line: If you want to allow the payday loan industry to keep doing business in Arizona, vote yes. If you want the payday loan stores gone in 2010, vote no.
1 Comment
December 16th, 2009 at 12:12 pm
According to Arizona Republic columnist EJ Montini, the Payday Loan industry has hired former AZ Attorney General Grant Woods and lobbying firm HighGround to craft legislation that will save the industry from restriction that take effect in the summer of 2010. Woods is also the co-chair of Governor Brewer’s gubernatorial campaign, and HighGround people will run her election operation.
Montini’s article doesn’t say much about what’s in the new legislation being worked on behind the scenes, except that it
Basically, the little we know about the new legislation sounds a lot like the Payday Loan Reform Act ballot initiative that voters already rejected in November 2008. The APR will still be $391%. And there is still a requirement to establish a payday loan database - though I’d be willing to bet there is also still nothing providing for a means of paying for servers, staff and infrastructure to maintain the database. That burden will either be placed on the taxpayers, or we’ll be left trusting the Payday Loan industry to maintain and use it, “policing” themselves with no oversight.
I’m recommending we keep an eye on this and be prepared to let our legislators know where we stand on the passage of this legislation once it is fully disclosed to the public.
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