Wednesday, March 8, 2006

An editorial in the Arizona Daily Star urges the Grand Canyon State to follow the recent lead of North Carolina and issue widespread restrictions on payday loan companies. As far as columnist Jim Kiser is concerned, this evidences how much states can do to protect consumers… if they are so inclined.

Last week, the last of the North Carolina payday loan outlets closed.

"We've fought payday lending at every turn, and now we're putting this industry out of business here in North Carolina," Attorney General Roy Cooper announced in a March 1 press release. "These payday lenders thought they'd found a way around North Carolina law. Now we're showing them the way out of our state."

North Carolina is just the latest example of what motivated lawmakers can do to protect citizens. Two years ago, Georgia payday loans effectively became a thing of the past when the state passed a law criminalizing them. A violation is punishable by up to five years in prison and a $10,000 fine. The newspaper cites these two states' examples as proof that leaders who are willing to withstand lobbyist pressure can eliminate payday advance companies for good.

But will the Arizona State Legislature accept responsibility for protecting the state's most vulnerable citizens? That's another story. While Tucson has passed a citywide ordinance to halt payday loan proliferation, Arizona as a whole has lagged. Elected Arizona officials must first understand that this is not a battle of free markets, as the lenders contend, but a crucial effort to defend its economy and at the same time protect its citizens.

North Carolina's campaign to ban payday loan firms worked like this:

• The Legislature reached a consensus that lenders were trapping borrowers into a cycle of debt.
• The Department of Defense lent a hand, as cash loan stores are often concentrated around military bases.
• When some large lenders disregarded North Carolina law, the commissioner of banking and the attorney general stood tall and fought the industry heavyweights in order to enforce it.
• This, in turn, forced competing lenders to offer alternatives.
• Advocates and concerned citizens then began to speak out and demand better from financial institutions and from themselves.

Only if the state officials are prepared to start — and win — this fight will the many Arizona payday loan firms be contained, if not eliminated.

This entry was posted on Wednesday, March 8th, 2006 at 3:06 pm and is filed under Georgia, Arizona, North Carolina.