Payday lenders float initiative to prevent loss of businesses

Industry proposal cuts fees, ensures the right to practice in Arizona

Amanda J. Crawford
The Arizona Republic
Mar. 4, 2008 12:00 AM

In November, voters may face a choice on payday loans: Kill the industry in Arizona, or amend its practices and extend its lifeline.

The payday-loan industry, which faces elimination in 2010 when an enabling law expires, filed initiative language Monday with the secretary of state. The proposal would reduce fees while extending the industry's right to practice in the state indefinitely.

The measure would counter a ballot proposal by payday-loan opponents. Stop Payday Loans would repeal a law that authorizes the industry to operate here and make giving loan a Class 5 felony.

Stan Barnes, a lobbyist and consultant to Americans for Financial Reform, a committee funded by the payday-loan industry, said the issue comes down to consumer choice.

"Payday-lending stores exist because customers in the real world make rational decisions about borrowing money short-term, and in many instances, payday loans are the least expensive option for people that have an emergency or unforeseen expense they have to deal with," he said.

Under the industry plan, fees payday lenders are allowed to charge would drop from $17.65 to $15 on a $100, two-week loan, Barnes said.

Lenders also would not be allowed to roll over the principal into extended loans and would have to offer consumers repayment plans, he said.

But Rep. Marian McClure, R-Tucson, chairwoman of Stop Payday Loans, said the reforms proposed by the industry amount to no more than "window dressing."

She said she tried to work with the industry to get meaningful reform through the Legislature for four years before going forward with the initiative, which follows other states that have eliminated the industry.

She said she has heard of too many families being destroyed by debt from high-interest loans.