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Arizona 2008 Prop 200
Proposition 200 - Payday Loan Reform Act
Would preserve small, short-term loans known as payday loans through rate cuts, the elimination of loan extensions and a new repayment plan.
A "yes" vote would repeal the July 1, 2010 termination date for the existing "payday loan" licensing program thus allowing it to continue indefinitely, allowing payday loan licensees to provide electronic debit agreement services, prohibiting services over 35 days, requiring payday loan agreements be in English or Spanish, prohibiting certain fees, permitting only one payday loan transaction with a customer each business day, requiring a payment plan if requested by the customer, prohibiting arrangements with customers having outstanding repayment plans, allowing licensees to make other loans and requiring licensee applicants to maintain a minimum net worth of at least $50,000 per location up to a maximum of $1,000,000.
A "no" vote would retain he current law regarding payday loans, which are to terminate on July 1, 2010.
Would the measure truly crack down on the payday loan industry?
Proponents:Yes. It creates tough new penalties for unregulated, off-shore Internet lenders, requires all Arizona payday loan stores to significantly reduce loan fees, prohibit costly loan extensions, mandate a no-cost repayment plan for those customers who cannot meet their obligations and preserve payday loans as a financial option for those who need it.
Opponents: No. Payday lenders have had free reign in Arizona because of a 10-year exemption from the state's 36% usury cap that the Legislature granted in 2000. Now they are using the initiative to try to extend the exemption indefinitely. All the reforms they say they support could be implemented without the need for the initiative.
Would Arizona be better off to eliminate the payday loan industry altogether?
Proponents: No, and it would be impossible to do so. The demand is so great for payday loans that they are here to stay no matter what reforms are enacted. And they provide a valuable service for people who face a cash crunch every now and then. It's far better to regulate the industry as this measure would do than to consider getting rid of the industry altogether.
Opponents: The state should take action to do away with harmful practices of the payday loan industry, and this measure would not accomplish that. Payday loan customers are forced to pay outrageous rates simply to stave off, for a short time, a family emergency or other misfortune. The best way to help those in need is to protect them from greed and exploitation. This initiative would make it more difficult for the state to do so.
Is it true that this measure would help the payday loan industry take advantage of the downtrodden?
Proponents: Definitely not. In fact, those critics who say the industry exploits the downtrodden have created a warped idea of the industry's customer base. Payday advance customers represent the heart of Arizona's middle class. They are hard-working adults who may not have savings or disposable income to use as a safety net. Most are solidly middle-class people who earn between $25,000 and $50,000 annually.
Opponents: Payday loans not only take advantage of the downtrodden, but they can ruin the lives of many other Arizonans who earn moderate incomes. A state corrections officer, for example, described how the payday loans he and his wife obtained at 391 percent interest led to escalating loan costs that ended up in long-term debt, nearingly costing him his home and his marriage. Similar stories are common, and the ballot initiative would not provide a solution.
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