Tobin pulls bill to extend payday loans
PHOENIX - A legislative hearing on a bill that would allow payday lenders to continue offering high-interest short-term loans in Arizona was delayed after the bill's sponsor said it didn't have enough support to advance.
Republican Rep. Andy Tobin of Paulden pulled his bill from a committee hearing agenda Monday but vowed to look for more support and bring it back.
"Right now we do not have consensus here to move forward," Tobin said.
Lawmakers from both parties have blasted the bill after voters in 2008 soundly rejected an initiative that would have allowed the lenders to stay open permanently.
Payday lenders operate under a temporary exemption from Arizona's 36-percent cap on annual interest rates. They charge $17.65 per $100 borrowed for a two-week loan, which amounts to an annual rate above 400 percent. The exemption expires on June 30.
Payday lending opponents say the industry preys on poor people in desperate situations, sometimes trapping them in a cycle of debt where they use one payday loan to pay off another.
Industry proponents say the market has shown a need for short-term, small-dollar loans that aren't generally available from banks or credit unions. They say the industry supports low-income families that otherwise wouldn't have access to credit in an emergency.
Lee Miller, a lobbyist for payday lenders, said Tobin's decision to pull the bill is not a major setback for the industry.
"The lenders never anticipated that the bill as introduced would be exactly the bill that was sent to the governor," Miller said. "We're going to try to work all the kinks out up front rather than moving it along and amending it later."
Tobin's bill, which is supported by the payday loan industry, lowers the fees to $15 per $100 borrowed and adds new restrictions in an effort to fix the concerns of critics. Most of the proposed restrictions were included in the 2008 ballot measure that voters rejected 60-40.
Among the restrictions, the bill would prohibit lenders from renewing loans. It also would prevent consumers from borrowing more than $500 at a time and require lenders to check an electronic database of active loans. Current law allows lenders to accept a borrower's word that they don't have a loan with another company.
Borrowers would have two days to back out of a loan at no cost. And consumers who worry they'll be tempted to borrow if times get tough would be allowed to reduce or eliminate their own borrowing authority.
Tobin's bill also would require lenders to create repayment plans that divide the loan's balance into equal payments due on the customer's next four paydays. Loans in a repayment plan would not be subject to additional interest if the payments are made on time, but customers would be limited to one repayment plan per year.
Sen. Debbie McCune Davis, a Phoenix Democrat who is among the bill's most vocal opponents, said the proposed restrictions have no teeth and would allow the industry to continue taking advantage of customers.
"They use the term reform, but in reality its just words on paper," she said. "It doesn't change the exploitation that happens in the community."