The state of Arizona lately allowed the licenses of money lenders for the entire state to lapse. Payday loan stores are within the process of closing their doors all over the state and are moving on to different pastures. Obama’s signature is the only thing the financial reform bill needs to pass. Most are worried that pay day loan will become obsolete if the bill passes since the bill works with the Federal Reserve to regulate lending.
Stores in Arizona closing
A recent article on azcentral.com highlighted the effects of the new usury cap, or percentage rate cap the state of Arizona has imposed. Only a two week loan with 36 percent annual interest can be given out by payday lenders in Arizona making it hard to stay in business. Check’N'Go which has cash advances, check cashing, and paydayloans, has already had to close 11 of its 34 stores. With summer coming to a close, 100 Arizona employees can be out of work adding to the unemployed list. The only way these companies can stay open is with car title loans. After payday credit is gone, bankruptcy, bounced checks, and debt collections will go up dramatically as outlined by studies.
Bill for financial reform
The financial reform bill will make certain the Federal Reserve has a Consumer Financial Protection Agency that goes to work. The bill, recently passed by the Senate, is awaiting the President’s signature. Payday lending will then fall out of the hands of the states, and into Federal jurisdiction. Payday lender will no longer be a business if the rate cap used by Arizona were to be considered by Federal government for law.
Why do the ban?
Awful loans and high interest being gone is what most believe is the best part, although the truth is that cash advances will have to abide by the same laws as mortgages and credit cards now. Too bad it wouldn’t work since only a couple of dollars would be made off each and every $100 loaned and it costs $14 to lend $100. If short term lenders can’t stay open, what is going to replace it to help the people who need these so badly?
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Further reading
AZ Central
azcentral.com/community/phoenix/articles/2010/06/27/20100627payday-lenders-quit.html
Consumer Affairs
consumeraffairs.com/news04/2010/07/payday_loans_finreg.html
