Tuesday, April 24, 2007

Arizonans who take payday loans would get more time to pay them back without financial penalties under the terms of legislation given preliminary House approval Monday.

The measure would leave intact existing laws that permit people to borrow up to $500 for two weeks for 15 percent of the value of the loan. That works out to an annual percentage rate in the neighborhood of 400 percent.

But SB1446 would prohibit “rollovers,” where lenders convince guaranteed payday loan borrowers who cannot repay within the two weeks to get another two weeks of credit - for an extra 15 percent fee.

Potentially more significant, it would spell out that those who cannot make the payment would be given a payment schedule for up to an extra 12 weeks to make good, all without having to pay any additional fees or interest.

Rep. Chad Campbell, D-Phoenix, said that payment schedule would be available to anyone. More to the point, it brings the effective annual interest rate down to about 52 percent on instant cash loans.

The measure has the acquiescence of lobbyist Lee Miller, who represents the owners of many of the more than 720 payday loan stores throughout the state.

That’s because of what lenders get in return: a right to stay in business. SB1446 would eliminate a provision in existing law that, unless repealed, would make it illegal to make Arizona payday loans after 2010.

However, Monday’s vote doesn’t guarantee there will be payday loan stores in Arizona forever. Rep. Marian McClure, R-Tucson, said she intends to pursue an initiative drive to statutorily ban these kinds of high-interest lenders.

Several legislators said Arizona never should have approved faxless payday advance lending in 2000.

Rep. Bill Konopnicki, R-Safford, disagreed. “These are emergency loan situations,” he said, adding they “fill a niche.”

A final roll-call vote is needed before the measure goes to the Senate.

This entry was posted on Tuesday, April 24th, 2007 at 2:00 pm and is filed under Arizona.