Arizona Payday Loan Laws

Consumer Lenders Act, Arizona Revised Statutes Annotated section 6-601 to -638 has prohibited companies operating as payday lenders. The state does allow small loans with a maximum interest rate of 36 percent and five percent for any fees.

• Maximum Payday Loan – Prohibited
• Maximum Payday Loan Annual Percentage Rate – Prohibited

The state lawmakers in Arizona anted to protect their residents by prohibiting all payday lending service companies instead of adjusting the laws and regulation. Many in favor had been battling for this outcome since 2000, when these lenders flooded into Arizona. At one point, there were more than 1,000 payday lenders in operation.

However, being prohibited from legally approving payday loans has not stopped the predator lenders. These lenders searched for ways to bypass the prohibition until they found it. Some lenders resorted to handing out prepaid debit cards instead of cash. The payday companies get to continue what they were doing, but now are not subject to conventional or payday lending laws. They are able to charge high interest and APR rates on top of astronomical fees. What’s even more despicable, is they have these debit cards set up so their customers and go into the red. The lenders issue these cards with several hundred dollars of “overdraft protection.” Many times the consumers are not even aware they can go over and when they do, more fees and interest is tacked on.

Over half of the previously payday loan companies applied to be title pawn brokers when they learned of the impeding ban on their services. This works in much the same way as a payday loan, but required the collateral of the client’s clear vehicle title. The APR is still high, at about 200 percent as well as the fees. Only this time, the lenders have something of value to hold over the borrowers in case they default on a loan.

These are just two of the tricks untrustworthy payday lenders use in order to get around the Arizona laws prohibiting them from operating. The other commonly use tactic is to operate their brick and mortar business in another state or country where payday loans are legal. The lenders then operate an online payday lending service to Arizona residents. The greed of many payday lending businesses usually knows no bounds. In some cases, threats of criminal actions and/or property seizures have been made to customers who have defaulted on one on these high interest loans, just to get a payment.

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