Local advocacy groups call on Arizona lawmakers to correct loan laws

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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 from the Phoenix-based Wildfire Group and the Center for Economic Integrity say proposed national legislation could end triple-digit interest rates that are passed on to consumers on short-term loans such as advances given in exchange. of 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 overturn current rules regarding high interest rates on short-term loans.

In the past, companies have typically evaded rate caps by putting banks out of state on loan documents, 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, $ 2,000 loan at 41%,” said Wildfire executive director Cynthia Zwick. “But several high-cost online installment lenders offer Arizona loans at rates of up to 160% or more with 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 capped some high-interest loans in part after voters rejected a move in 2008 that would have allowed payday lenders to continue operating in the state beyond 2010.

Ms Zwick said the high rates make it difficult for low-income families to repay 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 various fields are common practice for Arizona borrowers, but not all of them have worked legitimately.

In 2020, the Arizona attorney general announced a settlement with Texas-based Santander Consumer USA Inc., one of the nation’s largest subprime auto lenders. The settlement awarded more than 12,000 Arizona car buyers millions of dollars in financial assistance following allegations Santander violated consumer protection laws by granting high-interest loans to car buyers he knew they 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 cancellation.

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.

“It basically says it’s wrong,” Ms. Griffith said. “You are undermining the states. “

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

According to published reports, Checkmate CEO Jennifer Robertson said short-term loans are convenient for those who may 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 in tough economic times.

“We provide liquidity to our communities through a variety of services, including check cashing, wire transfer services, and small loan provisioning, all regulated under federal and state-specific laws 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,” Mr. McGuffin said. “We are here to uphold 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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