11/27/2008
You could say Arizona has a love/hate relationship with the payday lender. In the past few years, more than 750 short term loan shops have popped up all over the state. In November, voters turned down the crux of their operation-- high interest rates.
Proposition 200 would have extended a law exempting payday lenders from the 36-percent cap on interest rates. For years, payday lenders have charged as much as 450-percent on short-term loans. Now that prop 200 has failed, lenders will have to obide by the cap.
Lee Miller is chief lobbyist for Community Financial Services Association which supported prop 200 to extend the life of payday loan operations. He says banks have a monopoly on lending.
"Banks are unenthusiastic about making loans, and the loans they do make they charge exhorbitant fees and interest rates for," says Miller.
Only the Arizona Legislature can save payday lenders. Miller says he does not expect lawmakers to void the voters' decision on prop 200, but the industry will regroup to find a legal and profitable business model.
"How do you structure that product so that people who can reasonably pay the loan back can use the loans," says Miller. According to the Center for Responsible Lending, the average borrower takes out nine loans a year. In fact some customers will take out one loan after another, sinking deeper into debt. Folks on both sides of the payday loan issue say they want to stop the loan trap.
Source: http://www.kswt.com/Global/story.asp
