Payday-loan effort goes down hard

November 6, 2008

The future of payday-loan stores in Arizona was uncertain when Proposition 200, written and financed by the payday-loan industry, failed big Tuesday night.

The industry had funneled more than $13 million into the campaign and ran thousands of TV ads urging voters to pass it. Some payday-loan stores across Arizona even gave employees the day off Tuesday to help get it passed.

But Arizonans rejected it by a large margin. "We are feeling great," said Melissa Hodgdon, a No on 200 spokeswoman. "A lot of times money often wins the campaign because you are able to get the message out. . . . We did a great job of running a grass-roots campaign."

Opponents, who raised just more than $150,000, received support from business and political leaders while operating on a shoestring budget. The Yes on 200 campaign could not be reached Tuesday evening.

Prop. 200 would lower payday-loan fees, stop loan extensions and create repayment plans. The industry, which has experienced substantial growth this decade in Arizona, offered the changes in exchange for a provision that would allow them to keep operating. Existing law would essentially shutter payday-loan stores in 2010.

Prop. 200, which had the support of major publicly held payday-loan companies, also would make it difficult for small business to operate payday-loan centers. And Prop. 200 would allow payday lenders to charge up to 391 percent in annual interest despite reduced fees. The measure would have:

Capped fees at $15 per $100 borrowed, compared with the current limit of $17.65 per $100 borrowed. The borrowing limit would remain at $500.

Stopped loan extensions. Currently, loans can be extended up to three times with additional fees per extension.

Created a repayment plan at no additional cost for periods up to four months.

Resources: http://www.azcentral.com/