Tucson CitizenTucson Citizen

Payday loans: Voters not fooled by ‘reforms’

David has slain Goliath again. Tuesday, 59.5 percent of Arizona voters defeated Proposition 200, the initiative sponsored by the payday loan industry.

Payday lenders spent more than $14 million trying to fool the people of Arizona into passing the measure, while the group that opposed it spent just $150,000.

Congratulations, Arizonans! You saw through the scam.

The initiative was designed to fool you into thinking that a “yes” vote would be for reform of the industry.

Actually, the payday loan stores wanted you to vote “yes” so they could operate in Arizona forever.

Their initiative would have dropped the maximum interest rate on payday loans to 391 percent – still a whopping number.

But the proposition also would have allowed the lenders electronic access to checking accounts. So regardless of pending checks in a customer’s account, the payday lender would have been paid first.

Even more important to the payday loan companies was the repeal of the 2010 sunset date written into the 2000 law that allowed the industry to operate in Arizona.

Of course, they never informed you what they really wanted. So again, thank you for seeing through the scam.

Payday lenders say their rates should not be computed as annual percentage rates because their product isn’t really a loan, but rather a deferred presentment.

And the product is issued for two weeks, not annually, the lenders insist.

But a loan by any other name is still a loan.

The reality is, most consumers are not able to pay these loans two weeks later, on their next payday.

When they advise the lender that they can’t afford to pay, typically the company will ask if they can pay anything.

When the answer is yes, the company deducts the payment and then calculates the “new loan.” Then the consumer gives them a new check.

Such loans usually go on for six months, but sometimes they are rolled over again and again for more than two years.

Now, with the defeat of Prop. 200, there is a real chance that in 2010, the payday loan companies will find that the special law that enabled them will not be renewed.

At that time, they may restructure under existing consumer loan statutes, which allow rates of up to 36 percent APR. Or they can leave Arizona.

If they choose to stay, they will need to be licensed by the state Department of Financial Institutions and audited, just as banks and other lenders are.

Over the next two years, the Legislature will argue whether to extend the special law for payday lenders or let it expire.

We must let our legislators know next year that we do not want the law extended.

Marian McClure served eight years as a Republican state legislator from Tucson.

Citizen Online Archive, 2006-2009

This archive contains all the stories that appeared on the Tucson Citizen's website from mid-2006 to June 1, 2009.

In 2010, a power surge fried a server that contained all of videos linked to dozens of stories in this archive. Also, a server that contained all of the databases for dozens of stories was accidentally erased, so all of those links are broken as well. However, all of the text and photos that accompanied some stories have been preserved.

For all of the stories that were archived by the Tucson Citizen newspaper's library in a digital archive between 1993 and 2009, go to Morgue Part 2

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