Arizona Legislators Reject Bill that Would Allow High-Interest Personal Loans

[Mar 3, 2009.]

 

Arizona legislators killed a bill that would have replaced payday loans with a different type of high-interest personal loan. The bill proposed to allowed lenders to charge interest of up to 113% for short-term loans up to $3,000. If the measure had been passed by the House Banking and Insurance Committee, lenders outside the state would have been allowed to charge high interest to Arizona residents.

All lenders in the state, except payday lenders, can’t charge more than 36% annually on personal and other consumer loans. Arizona voters had previously rejected a plan that would have forced payday lenders to lower the maximum annual interest rate they charge to 391% from 460%, according to the Arizona Republic.  

Arizona is among the states that allow payday lenders to operate legally. Payday lenders in the state can make fast cash personal loans of up to $500 to people who have a job and a checking account.

The sponsor of the bill, Rep. Andy Biggs, a republican, said he was surprised the bill hasn’t passed since so many borrowers seeking personal unsecured loans can’t obtain them from banks and credit unions. He also said that if payday lenders go out of business people would need this type of unsecured personal loan that charges less interest than payday loans and allows early payoffs with no penalty.

However, the East Valley Tribune reported that Kathy Jorgenson, an advocate for the Society of St. Vincent de Paul said the proposed measure was just “a new version of predatory lending.”   

With many Americans desperate to make ends meet these days, predatory lenders are doing brisk business with fast cash personal loans. In some cases, online payday lenders are loaning money to people in states where they aren’t legally allowed to operate.

This was the fourth year this type measure was defeated in Arizona, so it won’t be surprising if another similar bill targeted at high-interest lending pops in the future.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.