Time to take payday loans off the market

However, there's a defective product — the payday loan — that is still available to consumers in Arizona and many other parts of the country. The time has come for Arizonans to take this product off the market.
Payday loans are harmful because instead of helping families cope with financial difficulties, they often trap those families into a cycle of debt.

These short-term loans, which usually have a term of two weeks, charge interest rates equivalent to about 400 percent annually.
The Washington, D.C.-based Center for Responsible Lending reported last year that 90 percent of payday lending revenues are based on fees charged to borrowers who take out one payday loan after another. The center reported that a typical payday borrower pays back $793 for a $325 loan.

Payday borrowers are often in worse shape financially after they've dealt with a payday-loan provider.

Thankfully, Arizona legislator Marian McClure, R-Tucson, and her allies are trying to sweep the payday-loan industry out of Arizona. Earlier this year, McClure introduced an initiative called Stop Payday Loans.
The initiative would cap the annual interest rate for short-term loans at no more than 30 percent plus the going prime rate.

As of Wednesday the prime rate — the interest rate charged by banks to their most creditworthy customers — was 7.75 percent. If McClure's initiative were the law today, that would mean short-term loans would have a maximum interest rate of 37.75 percent annually.

The initiative would effectively shut down payday-loan shops by outlawing their exorbitant fees. But before voters can decide whether the initiative becomes law, it has to get on the 2008 general election ballot.

McClure and her allies are ramping up efforts to collect the roughly 154,000 valid signatures needed to put the measure on the ballot. McClure said the goal is to gather about 200,000 signatures before the July 1 deadline.

"When people say they want to help, I tell them that I need two things," McClure said, "money and volunteers to gather signatures."
Individuals and organizations that want to help gather signatures can call McClure or Kelly Griffith, a payday-loan activist in Tucson. Their phone numbers are included with this story.

Money is needed to counteract efforts by the payday-loan industry to keep their businesses running. McClure and Griffith both said the industry is already running a "push poll" in Arizona aiming to sway voters to its side of the issue.

Those unable to give money, however, can can take a petition to their workplace, church or anyplace friends and colleagues gather. Every signature may help push payday lenders out of Arizona.

Source:http://www.azstarnet.com/business/206822