The Arizona House voted Thursday to create a new type of consumer loan — one with interest rates that are significantly higher than now permitted.
These loans, which could be from $200 to $1,500, include provisions for acquisition fees of up to 10 percent of the amount borrowed.
On top of that, lenders could charge 4 percent per month for the first $1,000 and 3 percent on amounts above that.
Rep. Michele Reagan, RScottsdale, acknowledged that combination could come out higher — in some cases, much higher — than annual interest rates lenders can charge under current law.
But she said there is a market for these small loans.
The preliminary vote comes as lawmakers are debating the future of the state’s payday loan industry, storefront operations that offer two-week loans up to $500 at annual interest rates approaching 400 percent.
Rep. Steve Gallardo, DPhoenix, said lawmakers should not create yet another type of loan that preys on “some of the poorest people in our society.”
Reagan, who said she shares some of the same feelings about payday loans, said Gallardo and other foes are missing the point.
“We keep hearing a lot of people in here say that they want to reform the payday loan process,” she said. “Well, how can you when there’s no other options out there?”
This, she said, creates one option.
But Rep. Marian McClure, R-Tucson, who is working to tighten up restrictions on payday loans, said she’s not convinced this is a better alternative.