Advocacy efforts pay off in Arizona

On November 5th, the Arizona Daily Star announced that voters in Arizona had defeated, by a margin of 60 percent to 40 percent, a ballot initiative that would have allowed payday loan companies to do business in the state forever. Despite a massive, multimillion-dollar campaign by the payday lending industry to get Proposition 200 passed, said the newspaper, grass-roots organizations successfully mobilized politicians, religious organizations, and the public to expose the perils of payday loans. As part of the grass-roots efforts and to increase awareness about this false reform, Consumer Action hosted a briefing and invited national and local experts to discuss the devastating effects of payday lending in our communities and counter efforts by advocates to eliminate abusive and predatory lending practices. The briefing was held on October 2nd at the Phoenix Public Library, in partnership with AARP of Arizona and the Center for Responsible Lending. “Are we going to let the loan sharks write their own law?” asked Jean Ann Fox, director of financial services for the Consumer Federation of America, to a group of concerned staff of community agencies that had gathered at the public library. After hearing an overview of the payday lending industry, how consumers are charged more than 400 percent interest rate to borrow money until their next paycheck, staff from the Better Business Bureau, Consumer Credit Counseling Services and the Phoenix Indian Center, among others, shared sad stories of hard working Arizonans and low-income minorities trapped by this high-cost debt. Panelists also included Aracely Panameño, Director of Latino Affairs for the Center for Responsible Lending in Washington, DC. “Payday loans are designed to keep consumers in debt. The client is trapped in a vicious cycle of refinancing because he or she cannot pay the original amount that was borrowed plus the interest within 14 days. Typically, a client refinances the loan nine times until he or she can pay the full amount” said Panameño. “Charging 300 and 400 percent interest rates is immoral; it should be illegal and criminal.” Don Ritchie, AARP volunteer, described some of the efforts taking place around Arizona to fight payday lending and how community agencies could join the 200 is No Reform campaign. “Payday lenders have a choice: accept 36% or go out of business. Other companies have succeeded with small loans. We know it works. We have to show payday lenders that Arizonans can come together.” On November 4 it did work. The advocacy efforts of hundreds of agencies in Arizona paid off. The Arizona law that legalized payday lending is expected to expire as scheduled on July 2010. All consumer loans - including payday loans- will then be subject to the state’s 36 percent usury limit.