Arizona House approves 204% ‘flexible’ loans

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.

Contact the reporter at [email protected] and follow her on Twitter @maryjpitzl.

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


Lela Alston, D-Phoenix

Heather Carter, R-Cave Brook

Rebecca Rios, D-Phoenix