The state of Arizona recently allowed the licenses of payday loan companies for the entire state to lapse. The state is also letting payday stores move out while they close their doors. The financial reform bill needs only one more thing- Obama’s signature. Part of the bill will create a new consumer financial protection agency within the Federal Reserve that will regulate consumer lending, and there is concern that a fate comparable to Arizona payday lenders’ awaits all payday payday lending nationwide.
Arizona shuts down stores
A recent article on azcentral.com highlighted the effects of the new usury cap, or percentage rate cap the state of Arizona has imposed. At 36 percent interest, or rather, 36 percent annualized interest (on a two week loan), any payday lending in Arizona are having a hard time keeping their doors open. Check’N'Go which has cash advances, check cashing, and pay day loan, has already had to close 11 of its 34 stores. With summer coming to a close, 100 Arizona employees could be out of work adding to the unemployed list. The stores left have to switch to car title loans if they want to stay in business. Studies suggest that closing payday credit is going to lead to much more bankruptcy, debt collections and bounced checks.
Informatin on the financial reform bill
The Federal Reserve will have a new Consumer Financial Protection Agency in it with the financial reform bill. Obama needs to sign the bill now that it has made its way through Senate. After it is signed, the Federal government will be entirely in charge of how payday lending goes. If the rate cap were to be imposed nationally, the entire industry will fold.
Who wants the ban?
It is thought that consumers will no longer be trapped by awful loans and high interest, or at least payday loan company may have to follow the exact same standards applied to mortgages and credit cards to cash til payday loan loans. Too bad it wouldn’t work since only a few dollars would be made off each $100 loaned and it costs $14 to lend $100. Since payday customers aren’t accessing first tier credit because they don’t want to or can’t, what is going to take the place of short term payday loan company if they cannot lend and keep their doors open?
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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