Arizona has let any payday loan companies in the state to end with licenses ending recently. Payday loan stores are within the process of closing their doors all over the state and are moving on to different pastures. Obama’s signature is the only thing that the financial reform bill needs to pass. Many are worried that payday loans will become obsolete if the bill passes since the bill works with the Federal Reserve to regulate lending.
Stores in Arizona closing
azcentral.com posted an article all about effects the percentage rate cap Arizona wants could have. At 36 percent interest, or rather, 36 percent annualized interest (on a two week loan), any payday lender in Arizona are having a hard time keeping their doors open. Check’N'Go, one of the largest payday loan, cash til payday loan and check cashing franchises within the country, quickly closed 11 of its 34 locations. 100 Arizona employees count on this for their income and will no longer have a job by the time summer ends. The stores left have to switch to car title loans if they want to stay in business. After payday credit is gone, bankruptcy, bounced checks, and debt collections will go up dramatically as outlined by studies.
Financial reform bill
The Federal Reserve can have a new Consumer Financial Protection Agency in it with the financial reform bill. Obama needs to sign the bill now that it has made its way through Senate. The Federal government could be responsible for once that happens. If the rate cap were to be imposed nationally, the entire industry will fold.
Who benefits from this?
Cash advance loans could have to follow standards used by other lending, or some believe awful loans and high interest could be gone. The only problem with that is that it costs almost $14 to lend $100 of payday credit, and 36 percent APR only yields a couple dollars per $100 loaned. What will happen to those people who can’t get any credit without beginning on paycheck loans when short term lenders are no longer in business?
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Further reading
AZ Central
azcentral.com/community/phoenix/articles/2010/06/27/20100627payday-lenders-quit.html
Consumer Affairs
consumeraffairs.com/news04/2010/07/payday_loans_finreg.html
