Critics cashing in on payday loan hysteria

Critics of high-interest payday loans are asking voters to put the industry out of business this year through an initiative petition drive that aims for the November general election.

They claim payday loan stores target the poor and trap them in an endless cycle of debt. Their argument is based primarily on information provided by the Center for Responsible Lending, a Washington-based nonprofit think tank that supports policies favoring consumers over mortgage and credit lenders.

But even the Center for Responsible Lending doesn’t propose the abolition of short-term loans. Instead, the center urges restrictions on the number of times that borrowers can “roll over” their loans and an upper limit on interest rates at the 36 percent, the same level already imposed on banks.

Just where these limits really should fall, if they are needed, is a debatable issue that should reflect local market trends and offer a reasonable return for the companies that offer payday loans.

That’s why we favor an alternative to the initiative drive that’s being pursued at the state Legislature by Sen. Robert Blendu, R-Litchfield Park.

Capitol Media Services reported Tuesday in the Tribune that the current state law that allows payday loan stores to operate is set to expire in 2010. Senate Bill 1239 would extend that deadline by two years. In the meantime, the Arizona Department of Financial Institutions would be empowered to research the practices of payday loan companies and the impact on borrowers.

Surely, the payday loan industry deserves an opportunity to demonstrate its practices are legitimate and do benefit its customers. Otherwise, an emotional stampede that shuts down an entire business sector to “protect” people who borrow more than they can afford doesn’t have to stop with payday lenders.

The next step would be to take away our credit cards by government force.