LOS ANGELES, June 14 /PRNewswire/ -- AboutPaydayLoan.com, a payday loan resource, reports that starting Thursday, July 1st, 2010, all payday loan stores in Arizona will have to stop payday loan services.
Speaking in front of a payday loan store, the Arizona attorney general Terry Goddard announced "Operation Sunset" is designed to "crackdown" on payday loans in the state, and payday advance loan stores will no longer be able to conduct business.
Payday loan lenders had a 10 year exemption on Arizona's financial regulation cap on annual interest rates approved back in 2000. That 10 year exemption will expire at the end of June and it will not be renewed because it didn't win the votes of Arizona residents. Nevertheless, the state of Arizona allows short term loans of 36 percent or lower, but payday loans will still be banned even if they manage to keep the interest at that level.
The main reason payday loans will be banned all together is that it would be too difficult to monitor interest rates, or enforce an interest rate cap, in the market. "You may have some payday lenders charge a higher interest to customers that have been denied by short term loans," says a payday loan expert. This means that over 600 payday stores either have to close their stores or change their business model . Over 200 of these stores have already requested to stay open in order to change their business model and transform to a completely different type of business.
There are also concerns that these "new" stores may try to push payday loans under a different name or foster different types of loans such as title loans or other short term loans. Starting in July, the state of Arizona will have a new hot line where citizens can report signs of payday lending within the state. The Operation Sunset hotline number is 1-866-879-5219.
Opponents of this move argue that eliminating such loans will only hurt the consumer, especially those who lack options and rely on payday loans, either because they have bad credit and\or have no assets for loans through a federal bank.
Shutting down payday stores and payday lending will result in a loss of hundreds of jobs if not thousands and it will have a direct negative effect on the State economy. There are also concerns that many of the Arizona payday loan customers, in particular those who are close to the state border lines, will drive out to neighboring states such as California, Nevada, New Mexico, or Utah where payday loans are still legal. More conveniently, they could apply for online payday loans, but many direct payday lenders such as Pay1Day.com will not fund the request of a personal payday loan to the citizens of the state of Arizona for fear that they will not be reached for repayment.