Arizona House approves 204-percent ‘flex’ loans

Arizona representatives OK’d a bill to allow flexible-credit loans, with interest rates of 204 percent, as an option for people who need quick cash but have no borrowing options

A bill authorizing short-term loans at an annual interest rate of 204 percent squeaked through the Arizona House of Representatives Monday after intense lobbying to lift the 36-percent cap on the state’s usury statutes.

The 31-26 vote moves the debate to the Senate, where the bill died last month in a committee but was revived as a strike-everything amendment.

Senate Bill 1316 would permit flexible-credit loans of up to $2,500 for a maximum two-year period. It proposes a 17-percent monthly interest rate for unsecured loans, which works out to 204 percent annual interest. Secured loans would carry a slightly lower rate: 15 percent per month, or 180 percent annually.

Supporters say the loans would provide a way for people facing emergencies but who have poor credit and no savings a way to get quick cash. Critics say the bill only opens an already vulnerable population up to predatory lending.

Rep. Brenda Barton, R-Payson, kicked off the debate by contradicting supporters who say there is no other place for a person to get quick cash.

“It is not true,” she said, pointing to a “payday loan alternative” promoted by the National Credit Union Association.

“This legislation is moving across the nation by a group of investors to make changes in all states,” Barton said.  It has already failed in four states, she said, but is still alive in Arizona and Mississippi.

Rep. Jay Lawrence, R-Scottsdale, said the focus on triple-digit interest rates obscures the needs flex loans fill. It could be someone facing a medical emergency, he said.

“There’s that one little person sitting there saying where am I going to go? What am I going to do?” Lawrence said, as he voted for the bill.

The debate echoed the discussion in the House last week when it first reviewed the bill.

Rep. Rusty Bowers, R-Mesa, was viewed as undecided going into Monday’s vote. He gave a winding speech about his personal financial philosophy to carry no debt, and spoke of a friend who lost a $3 million life-insurance policy because he had to sign it over to collateralize a debt.

He concluded by observing he has seen no hand-wringing over the national debt and voted for the bill.

“I vote aye to give another option,” Bowers said.

Rep. Debbie McCune Davis, D-Phoenix, said lawmakers spend a lot of time talking about the need to avoid debt as they manage the state’s finances.

The 204-percent rate the bill would authorize will only put more people into debt, she said. Student loans carry rates of 7 to 9 percent.

“I talk to young people every day who are crushed by that rate,” McCune Davis said. “We somehow think we’re going to do a favor by creating a new kind of lending, a new option?” She voted no.

Arizona voters outlawed payday loans in 2008, sending the lending industry on a search for other products that can be marketed to people with immediate needs and poor credit. The ban led to the creation of auto title loans, which require a loan to be secured by the title a borrower holds on his or her vehicle.

Reach the reporter at maryjo.pitzl@arizonarepublic.com and follow her on Twitter@maryjpitzl.

How they voted

The House of Representatives passed Senate Bill 1316 Monday after more than two hours of comments. Here’s how the vote breaks down:

YES – Republicans 

John Allen, Scottsdale

Sonny Borrelli, Lake Havasu City

Rusty Bowers, Mesa

Paul Boyer, Glendale

Noel Campbell, Prescott

Regina Cobb, Kingman

Doug Coleman, Apache Junction

Karen Fann, Prescott

Eddie Farnsworth, Gilbert

Mark Finchem, Oro Valley

David Gowan, Sierra Vista

Rick Gray, Sun City

Anthony Kern, Glendale

Jay Lawrence, Scottsdale

Vince Leach, Tucson

David Livingston, Peoria

Phil Lovas, Peoria

J.D. Mesnard, Chandler

Darin Mitchell, Litchfield Park

Steve Montenegro, Litchfield Park

Jill Norgaard, Phoenix

Justin Olson, Mesa

Warren Petersen, Gilbert

Frank Pratt, Casa Grande

Bob Robson, Chandler

T.J. Shope, Coolidge

David Stevens, Sierra Vista

Bob Thorpe, Flagstaff

Kelly Townsend, Mesa

Michelle Ugenti-Rita, Scottsdale

Jeff Weninger, Chandler

NO – Republicans

John Ackerley, Tucson

Brenda Barton, Payson

Kate Brophy McGee, Phoenix

Tony Rivero, Peoria

NO – Democrats

Richard Andrade, Glendale

Jennifer Benally, Tuba City

Reginald Bolding, Phoenix

Mark Cardenas, Phoenix

Ken Clark, Phoenix

Diego Espinoza, Tolleson

Charlene Fernandez, Yuma

Randy Friese, Tucson

Rosanna Gabaldon, Green Valley

Sally Ann Gonzales, Tucson

Albert Hale, St. Michaels 

Matt Kopec, Tucson

Jonathan Larkin, Glendale

Stefanie Mach, Tucson

Debbie McCune Davis, Phoenix

Juan Mendez, Tempe

Eric Meyer, Paradise Valley

Lisa Otondo, Yuma

Celeste Plumlee, Tempe

Macario Saldate, Tucson

Ceci Velasquez, Litchfield Park

Bruce Wheeler, Tucson

ABSENT

Lela Alston, D-Phoenix

Heather Carter, R-Cave Creek

Rebecca Rios, D-Phoenix

Source: Arizona House approves 204-percent ‘flex’ loans

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Author: Stephen G. Barr, Group Publisher

Author, Syndicated Columnist, Editor In-Chief and Group Publisher at SGB Media Group, a social media marketing firm specializing in digital media content production, publishing, affiliate marketing, public relations and advertising. Over 25 years experience in retailing, advertising, website & online forum development, niche social networking, affiliate marketing, search optimization, branding and identity, site location, non-profit fund raising. Event planning, promotion, production and MC/Host at public events. Author, Editor & Publisher of 35 syndicated, digital publications utilizing multiple digital distribution channels in conjunction with launching and administrating national advertising campaigns for major Fortune 500 advertisers in partnership with Google, Ning, Facebook, Myspace, Yahoo, DoubleClick, LinkShare, PepperJam and other industry leading third party affiliate networks. Product development team member from conception to launch on many websites, tangible goods and organizational structure for start ups. Specialties: Public relations, retailing, advertising, website & online forum development, niche social networking, blogging, email campaigns, affiliate/performance marketing, search optimization, branding and identity, site location, event production & promotion, non-profit fund raising and tasteful, responsible adult content publishing. An internationally recognized and read social media columnist & pundit on The Examiner, Associate Content, Vator.tv, X-Biz.net and Technorati and his own affiliated sites.

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