Major reform of the payday lending industry appears unlikely this year, as proposals from two Republican lawmakers won’t make it out of their respective chambers.
Sen. Chuck Gray’s pair of proposals — one to limit the fee charged to consumers and one to ban the industry from Arizona — will die on the desk of a committee chairman who won’t hear them, and Rep. Marian McClure’s attempt to heavily regulate the industry failed in committee.
McClure’s bill, H2224, would have created a registry to track and record every payday loan in the state, eliminated loan rollovers and required all short-term loans to be 30 days with a 20-percent fee. Current law sets the length of payday loans at two weeks with a maximum fee of 15 percent. Consumers are allowed to roll the loan over — that is, receive a two-week extension on repayment for another 15-percent fee — three times under current statute.
“I think payday lending is an inherently broken product and I don’t know if it’s fixable,” the District 30 Republican said.
The registry was a sticking point for Republican members of the House Financial Institutions and Insurance Committee who voted against the bill.
Lawmaker: Tracking citizens a concern
Rep. Eddie Farnsworth, R-21, said he had “grave concerns” over creating a way for the government to track citizens, saying he feared it would set a dangerous precedent for future Legislatures to enable similar tracking “in every aspect of our lives.”
McClure, though, said a registry of all loan users is vital to weeding out the unscrupulous payday lenders who ignore state law by allowing consumers to take out more than one payday loan at a time. Without a way to track who is getting loans, she said, there is no way to effectively enforce the law.
She said it is doubly important to create a registry in light of dozens of Internet-only payday lenders who illegally lend to Arizonans at rates above those prescribed by statute.
But Farnsworth said it is not government’s job to ensure consumers don’t get themselves into financial trouble with debt stemming from payday loans when the state doesn’t do similar things for credit cards or mortgages.
“I’m missing why we’re trying to protect people from themselves in this industry and not in other industries,” he said. “Nobody’s forcing them to go in and borrow.”
A proposed amendment crafted by the payday lending industry would have lowered fees on the loans in exchange for a registry that only tracks consumers who enter into a repayment program with a lender if they can’t pay the loan back within two weeks. However, it was never formally offered in committee because McClure said she opposed it.
The bill was rejected 4-5 in the committee’s Feb. 12 hearing.