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More lending options needed for Arizona families

Scot Mussi

Scot Mussi

For many families in Arizona, the “Great Recession” is far from over.  Continued bureaucratic meddling and poor policy decisions by our elected leaders have made it difficult for many hardworking taxpayers to make ends meet. For some families the situation is so dire that one unforeseen financial hardship (car trouble, leaky roof, etc.) could prove catastrophic, especially if the family lacks access to credit or other borrowing options to pay the bill.

That is why it is important for Arizona to expand the legal lending options for those struggling with access to credit. Unfortunately, 35 other states, including Texas, Utah, California, Nevada and Colorado, have far more consumer lending options than are available in Arizona.

That’s right, even regulatory-friendly California has more choice and lending options than Arizona. House Bill 2611 addresses this problem head-on by permitting consumer “flex loans.” A flex loan is like a line of credit with a $3,000 maximum cap, and the borrower has to demonstrate the ability to repay the loan.  In other states that have this product the average loan is approximately $1,000 and is paid off within a few months’ time frame.

These loans fill an important void in the Arizona market. They provide needed funds to working families that banks aren’t serving. Banks traditionally do not make smaller dollar loans, and banks generally don’t lend to families with lower credit scores.

Why would a business friendly state such as Arizona restrict lending options that would bring competition to this marketplace and is essential for struggling consumers?  The major reason is the misconception that by restricting these types of credit options we can protect our residents from making bad lending decisions.

Unfortunately, both empirical evidence and common sense have proven that the opposite in fact occurs. Several studies have been conducted on short-term lending and the results have been the same: demand is not reduced when states reduce or limit access to credit or short term loans. Instead, movements to ban short- term lending options such as “flex loans” have only driven borrowers to offshore or certain untraceable, unlicensed online options, or illegal lenders. These types of underground options are dangerous and offer no protections to our most vulnerable residents.

The only other legal option a borrower with a lower credit score is to put his or her car or TV down as collateral in a “pawn” transaction while others turn over their auto title and a set of their car keys for a “title” loan.  This is great for borrowers with some collateral, but it is not an option for many borrowers.

Flex loans provide a lifeline that gives many borrowers the opportunity to make ends meet or even improve their credit scores. It also gives the state’s economy a needed boost by making such loans available to a much greater number of Arizonans. And it creates more jobs in the state’s lending industry. Right now members of the Arizona Financial Choice Association employ more than 1,200 people in 90 locations. HB2611 would greatly increase that number.

For Arizona’s economy to operate at full speed, our lawmakers need to release the parking brake and allow lenders and borrowers to conduct business in an open, free market setting with competition and transparency.  HB2611 accomplishes this goal while providing a much needed lending option to Arizona residents who need it most.

–Scot Mussi is president of the Arizona Free Enterprise Club.


  1. We certainly do need more lending options for families and individuals impacted by a poor Arizona economy and low wage jobs. However, the product you are seeking to approve is not the right product for middle to low income families seeking to build their lives back up. Short-term loans can be a lifeline or if the interest rates are so high that families cannot “dig” themselves out, maybe we need a different product than what is being offered. Think about it! Would you pay 300% interest on a loan? You might if you are a student who needs to get through college, or a family whose roof caved in or even an individual with no credit rating. Find another product….this was gives few options except to bankrupt unsuspecting families. Free enterprise in the market is good, but not for this lending practice or product. To have it sanctioned and approved by this legislature is not fair to those who these folks will go after.

  2. I consider the loans you are proposing a form of organized crime. Many Arizonans are impoverished and these loans will drive them deeper into despair.
    Legislators who support this loan industry are sellouts and should be recalled.
    My neighborhood in Tucson is infested with loan shacks and check cashing shops that offer **** services. In those areas there is also frequently violence such as shootings, robberies, drug sales and prostitution.
    What people really need are credit unions and reputable banks that offer decent financial services without sucking money out of people’s wallets at the end of every week.

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