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Arizona AG warns payday lenders about new law
By Michelle Price Published: 06/09/2010
Arizona AG warns payday lenders about new law
Houston Chronicle
By Michelle Price Associated Press Writer © 2010 The Associated Press
June 9, 2010, 8:16PM
PHOENIX — Arizona Attorney General Terry Goddard on Wednesday warned payday loan stores not to try to keep operating as usual after a law authorizing their high-interest loans expires at the end of the month.
Speaking in front of a payday loan center in Phoenix, Goddard said he is initiating a plan to aggressively pursue violators.
A task force, a public education campaign and a consumer hot line are all part of Goddard's efforts to enforce the changes, an effort he calls "Operation Sunset."
The state law allowing payday lenders to operate for 10 years expires June 30. The lending industry tried but failed to persuade voters and the Legislature to extend the authorization.
Payday lenders write checks for short-term loans while charging fees that amount to interest rates of more than 400 percent on an annual basis.
When other states have tried to restrict the payday loan business, lenders have bypassed regulations by continuing to charge high interest rates and fees on loans marketed as prepaid debit cards and sham auto-title loans, Goddard said.
"Over 200 of the payday lenders in operation today have filed to convert to a license that will allow them to make auto-title loans," Goddard said. "We believe that a lot of people are ready by telling their customers to shift to auto-title loans, even if they don't have a car."
Goddard said his office will try to ensure illegal lending does not occur by looking past labels used by loan companies and examining the actual transactions.
The attorney general's office will also watch for payday lenders that try to operate on the Internet, Goddard said.
There are about 650 payday loan stores in Arizona. Executives have said some will stay open and try make a profit from other lines of business, including auto-title loans, check cashing and prepaid debit cards.
Lee Miller, a lobbyist for the payday loan industry in the state, said there will be no more payday loans in Arizona after July 1. Some lending companies will be pulling out of Arizona, he said, which means lost jobs and less credit available to some communities.
Other companies will explore new legal options to offer credit to consumers, Miller said. Some are considering legal auto-title loans or loans with an annual interest rate at 36%, the legal limit.
"The folks who had been offering that product heard the message from the Legislature loud and clear that that's no longer a good idea," Miller said.
It won't be easy to get payday lenders out of the state, Goddard said.
"This is a vigorous and well-funded opponent, and they're going to try to keep their foothold in Arizona," he said.
The toll-free number for Goddard's payday lending hot line is 866-879-5219.
