Payday Advance Ties Dropped by Utility Companies
By Paul RizzoPayday Loan Writer
Arizona’s major utilities have ended a longtime practice of allowing customers to drop off electric and gas payments at cash advance payday loan centers after a Phoenix community action group brought the matter to light.
Arizona Public Service Co., Southwest Gas and Tucson Electric Power Co. said they had begun the practice as a convenience to customers.
Earlier this month, they said they would quit over concern about potential problems related to regular and faxless payday loans.
“We were trying to do the right thing, with unintended consequences,” said Tammy McLeod, general manager of customer service for APS.
The change has met approval from Arizona Corporation Commission members, the Arizona chapter of the AARP and the Arizona Community Action Association, which advocates for low-income residents. That group helped publish a report earlier this month looking at the practice in Arizona and elsewhere across the country, describing the arrangement as a potential ambush for low-income people to be lured into high-interest online cash loans.
Payday loan centers offer easy-to-obtain, short-term loans to borrowers who promise to repay them plus a fee after the next payday.
The centers, which frequently also cash peoples’ checks, have come under fire for their rates, which some critics say are as much as 400 percent annually.
For years, most of the state’s major utilities arranged for customers paying cash to drop off their payments at pay day loan centers as well as grocery and convenience stores.
Both Tucson Electric Power and Southwest Gas used payday centers as main drop-off sites.
