Oregon and Pennsylvania recently joined Georgia and North Carolina in banning payday loans. New York, New Jersey, and most New England states have never
granted entry. By contrast, some western states (Washington, Idaho, Utah, and until recently New Mexico) have maintained relatively laissez-faire policies toward payday lending. Arizona just abandoned its drive to ban payday lending.

The Promoters of a new payday loan reform Act want to keep the industry in the state of Arizona. It goes to a vote in November here in Arizona, rather than banning it. In their arguments, the proponents of this legislation (who are the the payday coalition in AZ, by the way) point to research which basically says that payday lending is cheaper than a bounced check (true) and having payday loans available leads to less calls by debt collectors and increased bankruptcies. (Their evidence is sketchy on that one. ) Here is the whole report from the New York Fed.

Most payday lenders charge around $15 per $100 borrowed, pushing annual interest rates on two-week loans close to 400 percent. A bounced check fee is hard to quantify as far as what the APR is, as the amount of the check varies. Let’s use the $100 check amount rate: with bounced check fees at $35, let’s say that if you bounce a $100 check, the comparative rate weeks (1/26 of a year) implies an APR = ($35 check fee/$100 check) x 26 (2 week periods) = 910 percent.

Keep in mind that $35 overdraft fees are also being scrutinized by Congress and there have been reform bills to lower what many people consider a usurious rate on these fees.

From the http://www.affr2008.org website, what this bill will do (my comments in blue):

• LOWER FEES Mandate a substantial cut in loan fees. The Payday Loan Flyer says it will be lowered to $15 per loan. Isn’t that what they are charging now per hundred dollars? So if they lower the fee to $15 for a $300 loan, that’s still 130% interest.
• FLEXIBLE REPAYMENT PLAN - Eliminate payday loan extensions and establish flexible repayment plans for those who need them. You mean force people into loans which are controlled by them? At what rate? Neither the Website and flyer gives details.
• REGULATE INTERNET LENDING - Require internet lenders to be licensed in the state instead of operating outside the country, where they are not subject to consumer protection laws. And how are they going to regulate companies operating out of the country? This is a sounds-good-but-it-is-nonsense type of clause.
• FEWER PAYDAY LOAN STORES Enact tough new regulations that would reduce the number of store-front locations in our neighborhoods by cracking down on unscrupulous operators. (Hmmm - reduce competition for their own stores?)

Conclusion: this is not a good idea and also the total details are not known. I say vote this measure down and vote to ban payday lending in AZ.

This is the Payday Loan Flyer that has been sent to Arizona residents.

Popularity: 24% [?]