Payday lenders hoping for new legislation in order to stay in business

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TUCSON, AZ - For the payday lending industry, it's a last ditch effort push to help them survive in Arizona past July. That's when new rules go into effect that could force many of them out of business.

Since Prop 200 failed in 2008, payday lenders will no longer be able to offer loans at the current APRs around 400 percent. In fact, beginning July 1st, loans will be capped at a 36 percent APR.

So, the payday loan industry hired Grant Woods, former Arizona Attorney General and the governor's campaign co-chair. Even though he voted ‘No' on Prop 200, they hired him anyway. He says they wanted him to help them draft a list of reforms to include in a bill. They wanted reforms that voters like him could live with.

He says some of the reforms are similar to ones we saw in Prop 200 and some are new.

"The most significant one I think is the comprehensive database," Woods said.

He says it's a database that would track borrowers to prevent them from taking out more than $500 at any given time from any lender. Right now, that's not permitted but he says borrowers do it anyway. He says this is a way to ‘police' that activity.

Other reforms would include no more rollovers, so borrowers wouldn't continue to accumulate interest after the initial interest fee. As for the interest rates, they would go down slightly but would stay close to 400 percent.

Woods says in this economy, we can't let more people lose their jobs. He says the industry just needs reformed.

Lobbyists are currently looking for a state lawmaker to sponsor a bill with the new proposed reforms. He says that's expected to happen next week.

David Higuera, political director for Arizonans for Responsible Lending, says those reforms have not worked in other states and have not helped stop the predatory lenders and the borrowers who get trapped in debt.

He says they worked hard to make sure voters shot down Prop 200 and now he says they'll work hard to fight it again.

"Our coalition is staying engaged and we're going to fight the bill as soon as it hits a committee," Higuera said.

Woods says he hasn't spoken to Governor Brewer about this and doesn't plan too. He also says he doesn't believe his relationship with her will persuade her vote. However, he's confident she will support the reforms.

"I'm hopeful it will pass the legislature with bipartisan support and if it does then I'm confident the governor will sign it," Woods said.

The legislature is back in session Monday.