A bill allowing short-term loans at an annual interest rate of 204% creaked through the Arizona House of Representatives on Monday after intense lobbying to lift the 36% cap on usury laws of State.
The 31-26 vote moves the debate to the Senate, where the bill died last month in committee but was revived as a strike amendment.
Senate Bill 1316 would allow flexible loans up to $2,500 for a maximum of two years. It offers a monthly interest rate of 17% for unsecured loans, which equates to 204% annual interest. Secured loans would have a slightly lower rate: 15% per month or 180% per year.
Proponents say the loans would provide a way for people facing emergencies but who have poor credit and no savings to get quick cash. Critics say the bill only opens up a population already vulnerable to predatory lending.
Rep. Brenda Barton, R-Payson, kicked off the debate by contradicting proponents who say there’s no other place a person can get quick cash.
“That’s not true,” she said, pointing to an “alternative to payday loans” promoted by the National Credit Union Association.
“This legislation is being moved across the country by a group of investors to bring change to every state,” Barton said. It has already failed in four states, she said, but is still alive in Arizona and Mississippi.
Rep. Jay Lawrence, R-Scottsdale, said the focus on triple-digit interest rates obscures the need for flexible loans. It could be someone facing a medical emergency, he said.
“There’s this little person sitting there saying where am I going to go?” What am I going to do?” Lawrence said, as he voted for the bill.
The debate echoed discussion in the House last week when it first considered the bill.
Rep. Rusty Bowers, R-Mesa, was considered undecided ahead of Monday’s vote. He gave a meandering speech about his personal financial philosophy of being debt free and talked about a friend who lost a $3 million life insurance policy because he had to sign it to secure a debt.
He concluded by observing that he saw no hesitation on the national debt and voted for the bill.
“I’m voting yes to give another option,” Bowers said.
Does a 204% interest rate help in a pinch?
Democrats voted en bloc against the bill, joined by four Republicans.
Rep. Debbie McCune Davis, D-Phoenix, said lawmakers spend a lot of time talking about the need to avoid debt in managing state finances.
The 204% rate the bill would allow would only put more people in debt, she said. Student loans carry rates of 7 to 9 percent.
“I speak to young people every day who are crushed by this rate,” McCune Davis said. “We kind of think we’re going to do a favor by creating a new type of loan, a new option?” She voted no.
Roberts: House throws poor Arizonans to the sharks
Arizona voters banned payday loans in 2008, sending the credit industry searching for other products that could be marketed to people with immediate needs and poor credit. The ban led to the creation of auto title loans, which require a loan to be secured by the title a borrower holds to their vehicle.
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how they voted
The House of Representatives passed Senate Bill 1316 on Monday after more than two hours of commentary. Here’s how the vote breaks down:
YES – Republicans
John Allen, Scottsdale
Sonny Borrelli, City of Lake Havasu
Rusty Bowers, Mesa
Paul Boyer, Glendale
Noel Campbell, Prescott
Regina Cobb, Kingman
Doug Coleman, Apache Junction
Karen Fann, Prescott
Eddie FarnsworthGilbert
Mark Finchem, Val d’Oro
David Gowan, Sierra Vista
Rick Gray, Sun City
Anthony Kern, Glendale
Jay Lawrence, Scottsdale
Vince Leach, Tucson
David Livingston, Peoria
Phil Lovas, Peoria
JD Mesnard, Chandler
Darin Mitchell, Litchfield Park
Steve Montenegro, Litchfield Park
Jill Norgaard, Phoenix
Justin Olson, Mesa
Warren Peterson, Gilbert
Frank Pratt, Casa Grande
Bob Robson, Chandler
TJ Shope, Coolidge
David Stevens, Sierra Vista
Bob Thorpe, Flagstaff
Kelly Townsend, Mesa
Michelle Ugenti-Rita, Scottsdale
Jeff Weninger, Chandler
NO – Republicans
John Ackerley, Tucson
Brenda Barton, Payson
Kate Brophy McGee, Phoenix
Tony Rivero, Peoria
NO – Democrats
Richard Andrade, Glendale
Jennifer Benally, Tuba City
Reginald Bolding, Phoenix
Mark Cardenas, Phoenix
Ken Clark, Phoenix
Diego Espinoza, Tolleson
Charlene Fernandez, Yuma
Randy Friese, Tucson
Rosanna Gabaldon, Green Valley
Sally Ann Gonzales, Tucson
Albert Hale, St. Michaels
Matt Kopec, Tucson
Jonathan Larkin, Glendale
Stefanie Mach, Tucson
Debbie McCune Davis, Phoenix
Juan Mendez, Tempé
Eric Meyer, Valley of Paradise
Lisa Otondo, Yuma
Celestial Plumlee, Tempe
Macario Saldate, Tucson
Ceci Velasquez, Litchfield Park
Bruce Wheeler, Tucson
ABSENT
Lela Alston, D-Phoenix
Heather Carter, R-Cave Brook
Rebecca Rios, D-Phoenix
