PHOENIX — Arizonans who get "payday loans" would receive more time to pay them back without financial penalties under the terms of legislation given preliminary House approval Monday.
The measure would leave intact existing laws that permit people to borrow up to $500 for two weeks for 15 percent of the value of the loan. That works out to an annual percentage rate in the neighborhood of 400 percent.
But Senate Bill 1446 would prohibit "rollovers," in which lenders persuade borrowers who can't repay within the two weeks to get another two weeks of credit — for an extra 15 percent fee.
Potentially more significant, it would spell out that those who can't make the payment would be given a payment schedule for up to an extra 12 weeks to make good, all without having to pay any additional fees or interest.
Rep. Chad Campbell, D-Phoenix, said that payment schedule would be available to anyone. More to the point, it would bring the effective annual interest rate down to about 52 percent.
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The measure has the acquiescence of lobbyist Lee Miller, who represents the owners of many of the more than 720 payday-loan stores throughout the state.
That is because of what lenders would get in return: a right to stay in business. SB 1446 would eliminate a provision in existing law that, unless repealed, would make it illegal to make payday loans in the state after 2010.
But Monday's vote doesn't guarantee there will be payday loans stores in Arizona forever. That's because Rep. Marian McClure, R-Tucson, said she intends to pursue an initiative drive to ban these kinds of high-interest lenders.
And McClure told Capitol Media Services that even with the restrictions contained in SB 1446, she believes the industry can't be properly regulated. McClure said final ballot language is still being crafted.
Payday loans essentially are "deferred presentment transactions." A would-be borrower writes out a check for the amount needed, plus 15 percent. The lender provides the cash and agrees to hold the check until the end of the two weeks.
Several legislators said Arizona never should have approved payday lending in 2000.
"They should be kicked out," said Rep. Ed Ableser, D-Tempe. "Any sort of practice which preys and reaps profit off the unfortunate circumstance of an individual that really has no other place to turn is immoral at best."
Rep. Bill Konopnicki, R-Safford, disagreed. "These are emergency-loan situations," he said, adding that they "fill a niche."
A final roll-call vote is needed before the measure goes to the Senate.