Companies that make money providing “payday loans” have formed an organization they say is designed to “reform” their industry.
But a lobbyist conceded Wednesday the main goal is to convince voters not to sign petitions to put a measure on the 2008 ballot that could put them out of business.
Lee Miller, who represents Arizona Consumer Financial Services Association, said the group, dubbed Arizonans for Financial Reform, hopes to make the case that there is a role for the short-term, high-interest loans.
The two-week loans essentially involve someone writing out a check that everyone acknowledges is not good. The lender agrees to provide up to $500 in cash and not to cash the check — written for the face amount plus 15 percent — for up to two weeks.
On an annual basis, those fees can total close to 400 percent a year.
Miller said the new group will “educate” Arizonans about why payday loans exist, what the rules are, who borrows from these companies as well as the alternatives.
For example, the group’s Web site says a $15 fee on a $100 loan, even for just a two-week loan, is preferable to what banks and merchants charge customers who write bad checks.
He said, though, the industry is willing to reform its practices.
He will be asking the Legislature to make several changes in the statutes that regulate payday loan firms. These include limits on “rollovers” which extend the loans repeatedly — at additional costs to borrowers — and providing an interest-free repayment schedule to those who cannot repay the money at the end of the two weeks.
A similar bill was before the Legislature last year, only to be yanked from consideration by Rep. Marian McClure, R-Tucson. Instead, she launched an initiative drive to make payday loans illegal in Arizona.
“Payday loans are a defective product,” she said. “There is no way to reform them.”
But Miller said the changes his clients are pushing will improve the industry while preserving the ability of Arizonans to get the loans.