Local advocacy groups call on Arizona lawmakers to correct loan laws


Some local advocacy groups are asking for support for proposed laws that would help prevent some fringe lenders from charging high interest rates on short-term loans.

Officials at the Phoenix-based Wildfire Group and the Center for Economic Integrity say proposed national legislation could stop triple-digit interest rates that are passed on to consumers on short-term loans such as advances given in exchange for car titles.

New laws could prevent businesses similar to securities lending companies from charging more than the state’s interest rate caps allow. Lawmakers could use the Congressional Review Act to reverse the current rules regarding high interest rates on short-term loans.

In the past, companies have generally circumvented rate caps by submitting loan paperwork to outside banks, say opponents of fringe lenders.

Last month, U.S. Senators Chris Van Hollen, D-Maryland, Sherrod Brown, D-Ohio, and Congressman Chuy García, D-Illinois, introduced the resolution.

“Arizona law caps the annual interest rate on a 2-year loan of $ 2,000 at 41%,” said Cynthia Zwick, Managing Director of Wildfire. “But several high-cost online installment lenders are offering Arizona loans at rates of up to 160% or more by including an obscure bank name on the loan agreement.
“There is no other way to define or describe this than as a pure and appalling example of predatory lending,” Ms Zwick said.

Arizona has a cap on certain high-interest loans in part after voters in 2008 rejected a measure that would have allowed payday lenders to continue operating in the state beyond 2010.

Ms Zwick said the high rates are preventing low-income families from repaying their short-term loans. She said many low-income families may not have access to credit and aggressive marketing tactics made short-term loans attractive.

High interest loans in a variety of arenas are a common habit for Arizona borrowers, but not all of them have worked legitimately.

In 2020, the Arizona attorney general announced a deal with Texas-based Santander Consumer USA Inc., one of the nation’s largest subprime auto lenders. The settlement has given more than 12,000 Arizona car buyers millions of dollars in financial redress over allegations Santander violated consumer protection laws by granting high-interest loans to buyers cars he knew couldn’t afford.

The ad said Arizona consumers would receive between $ 22.7 million and $ 41.5 million in relief in the form of restitution checks, in-kind relief or debt forgiveness.

Kelly Griffith, executive director of the Center for Economic Integrity in Tucson, said her nonprofit group helps consumers on a variety of issues. She said the group believes Arizona’s consumer loan laws need to change.

“He’s basically saying it’s wrong,” Ms. Griffith said. “You underestimate the States.”

Supporters of the current laws say short-term borrowing methods are essential, especially since the onset of the pandemic.

According to published reports, Jennifer Robertson, CEO of Checkmate, said short-term loans were convenient for those who might not have a bank account. She said one in four Arizona residents “do not have deposit accounts at traditional financial institutions,” according to a 2017 FDIC annual report.

In published reports, Ms Robertson said check cashing is essential for communities during times of economic crisis.

“We provide liquidity to our communities through a variety of services, including check cashing, wire transfer services, and small loan granting, all regulated in accordance with federal laws and state-specific statutes. which in many cases cap our fees, ”Ms. Robertson told the report.

James McGuffin, spokesperson for the Arizona Department of Insurance and Financial Institutions, said officials could not comment on any proposed legislation.

The Arizona Department of Insurance and Financial Institutions enforces financial institution and insurance laws to help protect consumers from all types of fraud.

“We don’t want to get into the middle of this,” McGuffin said. “We’re here to enforce whatever the state legislature puts on the books.”

Ms Griffith said lawmakers must take action to protect consumers.

“It is necessary if we are to protect loan laws in this state.”

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