Arizona Voters Reject Payday Loans

In addition to our good neighbors to the south in Ohio the voters in Arizona also rejected a bill that would have allowed payday lenders to continue in that state.

Payday Lending

Here at Auto Credit Express, we have always felt that the informed consumer is our best customer. As part of that process, we have previously discussed not only payday loans, but the ballot initiative in Ohio that was designed to overturn a consumer-friendly payday lending law passed by the state legislature in July of this year.

Payday lending is the act of loaning money, by certain national companies, out of small storefront shops that specialize in making small loans (between $100 and $500) for short periods of time. Normally, this might seem innocuous enough, but these loans are made at a cost of $15 per $100 loaned (for 2 weeks). If you do the math, this works out to an annual percentage rate of 391%.


Unlike Ohio, the state legislature in Arizona had not taken any action against the industry. Instead, the lawmakers in Arizona had passed a measure that exempted the payday loan industry from the state’s usury laws and allowed the industry to charge borrowers as much as $17.65 in fees on a $100 two-week loan. This exemption, however, was set to expire in 2010.

Being the proactive group that they are, the payday loan industry set about making the exemption permanent with a “citizen initiated” constitutional amendment in the form of Arizona Proposition 200.

Ballot Language

In addition to an $8.7 million war chest created by a trade group representing payday lenders (Arizona Community Financial Services Association), payday lenders were also able to get very favorable wording on the ballot proposal:

“Arizonans use payday lending services everyday to meet unforeseen expenses and financial emergencies. The payday lending industry is set to be eliminated and the Arizona Legislature refuses to enact reforms to benefit borrowers while preserving this important financial option. This measure will bring dramatic pro-consumer reform to payday lending and preserve consumer choice. It includes a substantial rate cut, eliminates rolling-over principal to extend a loan, creates a repayment plan at no cost to customers that can’t meet their obligations, and inhibits a borrower’s ability to obtain more than one loan at a time.”

The Results

Even with what many would consider less than “transparent” language, on November 5th, Arizona voters defeated Proposition 200 by a percentage of 59.5% to 40.5%. Here at Auto Credit Express, we would like to congratulate the citizens of Arizona.

Posted on December 11, 2008 by in Uncategorized
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