Will the Sun Set on Arizona Payday Loans?

In 2018, voters in Arizona were asked to vote on Proposition 200. Proposition 200 was designed to not only extend the laws that allowed payday lenders to exist in the state in the first place, but to also ease some of the restrictions placed on payday lenders by the government. The proposition was rejected by a solid majority of voters.

As it now stands, on July 1, 2020 payday lenders will no longer be able to operate in the state. The laws that allowed these businesses into the state are set to expire at that time, and opponents are working hard to make sure that there are no last-minute legislative changes.

What this means is that, among other things, payday lenders will have to conform to the state’s cap of 36 percent interest on loans. This cap is set by the state’s usury laws, and doesn’t apply to payday lenders.

Critics of the payday loan industry levy a variety of charges against them. For example, they claim that the payday lending industry is flooding Arizona with lobbyists who are trying to get the legislature to do something before the laws expire.

The critics also suggest that the rates charged by payday lenders are unreasonable. The fact of the matter is, however, that many consumers disagree. Because payday loans are typically paid off within a couple of weeks, the Annual Percentage Rate (APR) on these loans can be quite high while the actual fees and interest paid by the consumer aren’t as significant.

Critics also point to a coalition of business organizations, neighborhood leaders and faith-based groups that oppose payday lending. However, the businesses also have their advocates. There are a number of business groups that support the right of payday lenders to operate.

Part of the problem may be the way that Proposition 200 was designed. Instead of just extending the law that allowed payday lenders to come into existence, the proposition would have eased some of the restrictions that do already apply to the payday lenders. It’s possible that a measure seeking to merely renew the law that’s about to expire may have been able to muster enough votes to pass.

If the law expires, Arizona will be one of only a handful of states that have effectively banned payday lenders from their states. As of right now, only three other states ban payday lenders altogether.

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