2008 Ballot Propositions Transcript

PROPOSITION 200, PAYDAY LOAN REFORM ACT:

Secretary Brewer Explanation of a Yes and No Vote

SECRETARY JAN BREWER: A yes vote shall have the effect of repealing the July 1st, 2010, termination date for the existing payday loan license program, thus allowing it to continue indefinitely. Allowing payday loan licensees to comply with electronic debit agreement services, prohibiting services over 35 days, requiring a payday loan agreement to be in English or Spanish, prohibiting certain fees, permitting only one payday loan transaction with a customer each business day, requiring a payment plan if requested by the customer, prohibiting arrangements with customers having outstanding repayment plans, allowing licensees to make other loans, and requiring licensee applicants to maintain the minimum net north of at least $50,000 per location, up to a maximum of $1 million.

A no vote shall have the effect of retaining the current law regarding payday loans, which are to terminate on July 1st, 2010.

Argument For Proposition 200

MR. STAN BARNES: Good evening, everyone. I'm Stan Barnes with the Yes on 200 Campaign, the payday loan reformat. Should we reform payday loans or should we eliminate payday loans in Arizona? That's the question in Proposition 200. A little background. There are thousands of Arizonans every day that use payday loans to meet temporary or emergency financial surprises in their lives. All of these customers of payday loan stores in Arizona must have a good job and they must have a bank account. The average customer is a guy whose car is broken down, he needs that car to get to work, there's too much month at the end of the money, and so, that customer goes to a payday loan store because it is simple, it is convenient, and get this, it is less expensive than many other credit options available to that customer.

The number one reason people use payday loans in Arizona is to avoid other more costly loan and options. Proposition 200 will bring pro-consumer reforms to payday lending and preserve this option for those people who choose it. It includes lower fees, eliminating of loan extensions, a repayment plan for those customers who need that -- that sort of thing, and deals with unregulated offshore Internet lenders as well. Plus, these regulations will lead to fewer stores in Arizona.

Now, opponents take an extreme position on payday lending in Arizona, opponents of Proposition 200, which is to eliminate payday lending. They insist on describing a payday loan in APR terms, when really it's $15 per $100, which customers understand. They refuse to accept that customers make rational decisions with their own money to avoid more costly options and use payday loans for their simplicity and their convenience, and the fact that they cost less.
Reform is better than elimination. Get the facts and read it for yourself. Reformazpaydayloans.com is our Website.

MODERATOR CAREY PFEFFER: Time.

MR. STAN BARNES: Vote yes on 200. Thank you.

Argument Against Proposition 200

MS. DEBBIE MCCUNE DAVIS: Thank you, Carey. Stan has told you one-half of the story. Proposition 200 will legalize 400 percent interest rates for payday lenders permanently. There's no reasonable choice here but to vote no.

The industry calls it reform, but it's not. The real reform comes in July of 2010 when the Consumer Loan Act is reinstated and 36 percent interest rates become the law of the land again.

The tide has turned against payday lenders as states realize the mistake they made by giving them authority to conduct business and reverse the special exemptions for payday lenders. Why? Because research has shown, and the industry has acknowledged, that their survival depends on making multiple high-interest loans to the very same customers. The borrowers can't afford to pay them off and are caught in a revolving door of debt.

The strategy in Arizona is for the industry to spend $11 million to bombard you, the voters, with slick, deceptive flyers and blanket the airwaves with ads that try to fool the people into believing that Proposition 200 is reform. It is not reform. It lowers interest rates from 458 percent -- annual percentage rate to 391 percent. It allows a two-week loan to be written to the same customer 24 times in one year. It has a repayment plan, but the industry knows that plan doesn't work. And a frightening feature of this law is it would actually give lenders electronic access to borrowers' bank accounts.

True reform comes with a no vote and a return to financial sanity. Arizona voters can follow the lead of 15 states, and the District of Columbia, and the Federal Congress, by putting payday lenders back under a 36 percent cap. The congress did it for military families and was supported by both John McCain and Barack Obama.

Learn more at 200isnoreform.com. Join the Attorney General, AARP, the cumenical Council, and many community partners in voting no on Prop 200.

MODERATOR CAREY PFEFFER: Two minutes.

MS. DEBBIE MCCUNE DAVIS: Thank you.

Questions and Answers for Proposition 200

MODERATOR CAREY PFEFFER: Our question on Proposition 200 comes from Brian. The question is: If Proposition 200 fails, will payday lending agencies immediately go out of business or somehow be immediately impacted? If Proposition 200 fails, will payday lending agencies immediately go out of business?

MR. JOSEPH KANEFIELD: If Proposition 200 fails, it will not put payday loan businesses -- it will not eliminate payday loan businesses. What it -- what it will do, as one of the speakers eluded to, is in 2010, the current exemption that the industry, the payoff industry, has from the state laws that limit the amount of interest that a lender can charge a borrower will apply to those businesses.

MODERATOR CAREY PFEFFER: Question from Arthur. And this deals with Proposition 200, the Payday Loan Reformat: Isn't there a law that bans lenders from charging interest rates greater than 36 percent, and why doesn't that apply to payday lenders here in Arizona? Basically, the question focusing on what is the current law, and is there some sort of exception here in Arizona for folks who are in this business?

MR. MIKE BRAUN: Carey, there is an existing set of statutes, separate and apart from the payday lender statutes, that do cap the interest rate at 36 percent, but there is carved out from that 36 percent limit the specific provisions that you find, largely in the -- in the proposition itself, that allow the $15 per $100 borrowed to be charged. And that, obviously, exceeds 36 percent on an annual basis.

MODERATOR CAREY PFEFFER: A question again about Proposition 200, the Payday Loan Reform Act: Do payday loan companies charge annualized interest in APR or a flat fee for the two-week loans they offer consumers? And this may go specifically to the working of the payday loan business. I'm not sure if it falls under your area, but if you're able to respond.

MR. MIKE BRAUN: Carey, as I recall, but let me just turn to that provision to be sure. Although I believe the consumer has to be notified what the annual percentage rate calculates to be, the statute, both as it exists now and as it would exist if amended under this proposition, sets, I believe -- I believe it's a cap of $15 per $100 that is borrowed that I believe translates to an annual percentage rate of close to 400 percent. But the statute itself, as proposed to be amended, actually caps the length of that loan at 35 days. So, the time that's provided for in the proposition is not to exceed 35 days, but traditionally those types of rates get calculated on an annual basis, I assume, in an effort to ease comparison.