Payday Loans Could Not Be Fixed By Proposition 200

A heavy-hitting list of rivals is not the only cause to not vote on Proposition 200. But the breadth of opposition is a measure of the troubles in the payday-loan initiative.

The ranks of the rivals include AARP Arizona, the Chandler and Greater Phoenix chambers of commerce, Valley of the Sun United Way and the Arizona Ecumenical Council.

They are under pressure because this is an industry-written "reform" package that has very little to do with securing consumers and a lot to do with letting payday lenders operate by their own rules in perpetuity. Once ballot measures have been passed it can't be changed without the approval of the voter.

The payday loans business didn't exist in Arizona until 2000, when the Legislature opened the door by exempting it from the state's 36 percent cap on the annual interest rate on consumer loans. The exemption, which allowed lending at the annual equivalent of 460 percent, ends in 2010.

The lenders of payday loans compete that they help out cash-strapped customers who just require some finance until they receives their next paycheck. But consumers can get caught up in a burden of debt.

Just look at the military. So many service people were holding so much payday-loan debt that it was interfering with performance and readiness. In 2006, Congress stepped in and banned loans to the military at annual interest rates above 36 percent. Fifteen states have capped consumer lending at that level or below. When North Carolina did so, payday lenders pulled out.

A study revealed that the enormous majority of households were unaffected. They used a collection of other options for dealing with monetary deficits, including delaying payments, getting loans from finance companies and borrowing from family and friends.

Proposition 200 makes only limited enhancements in the structure of payday lending. Loans couldn't be rolled over. Customers could enter a repayment plan once a year, if they ask for the option before the loan was overdue. But the big selling point, a considerable drop in interest rates, would simply close a loophole allowing lenders to charge 17 percent more than the Legislature intended.

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