PHOENIX — Payday lenders who were barred from operating in the state under
a 2008 voter initiative are asking the Legislature to approve a new loan product
that will get them back in business.
The proposal to allow so-called “flex loans” is designed to allow borrowers
with bad credit to get small loans to meet essential needs, according to the
Republican sponsor of the bill, Rep. J.D. Mesnard of Chandler.
“What we are talking about is not payday loans — they don’t get to hold your
paycheck over your head,” Mesnard said. “And it fulfills a particular need.
Right now there is no ability for somebody who has bad credit and can’t get a
credit card who faces an emergency situation to get a loan.”
But opponents, including
Rep. Debbie McCune Davis, D-Phoenix, call the loans a
way to ensure high profits for lenders while locking consumers into a cycle of
debt. Including fees, the loans can cost consumers nearly 200 percent interest a
“This isn’t credit in the traditional sense of the word,” said McCune Davis.
“I don’t think anybody can argue that loans that keep you in debt in perpetuity
operate in the state by a nearly 2 to 1 margin. That forced the industry to shut
down in 2010, and they have been unable to get lawmakers to approve a new entry
for the lenders.
Current law now caps interest rates at 36 percent, plus a fee that tops out at
$150 per loan. The new legislation, counting interest and daily fees, nears 200
Category: Payday loans