Payday loan debate in Arizona

Payday loans are really getting the heat these days, aren’t they? I ran across a news article online which talked about a debate in an Arizona church about payday loans. On one side, there was Timothy S. Janouseks, the South Arizona coordinator for Arizona for Financial Reform. On the other side, there was Rep. Timothy Janousek. The former was lobbying for changes in the payday loan industry while the latter was seeking to classify payday loan lending as a felony. Talk about two ends of the spectrum!

I won’t even bother dwelling much on MCSL statements as I think that they are just way too extreme. Her position on the payday loans for people with no credit history issue does not really solve any problem or need, in my point of view. On the other hand, Timothy presented some interesting points. These are:

– Cut the fee by 15 percent per two-week loan from 17.65 percent to 15 percent.
– Eliminate rolling over principal balances to extend loans.
– Create a free repayment plan for those who can’t pay their loans when they’re due.
– Implement a statewide database of people on repayment plans to prevent them from taking out other payday loans to cover the first loan.

Let’s look at each point one by one. The figures in the first point may differ here in the USA as Timothy’s situation is quite different in the US. The idea seems to be a good one, though. Lowering the allowed fee could be of more help to those in need of urgent cash. Of course, this has to be looked into in more detail as the feasibility of the fee cut could jeopardise the payday loan industry. But if a fee cut can be done and keep payday loan lenders in business, then I am all for it. It is definitely better than denouncing payday loans completely!

The second point is another matter that should be considered in more detail. If the principal balances are not rolled over, would this be feasible for payday loan lenders? If so, then I am all for it – it would certainly make for easier borrowing and repayment. This also means that more people will be able to avail of more payday loans.

I think that to some extent, the third point is already being practiced by some payday loan lenders. Perhaps better repayment plans could be considered instead. Another option would be to have standards as to the structure of repayment plans.

For the last point, I am sure that this will get mixed reactions. For one, many people like the idea of being able to take out multiple payday loans. Then again, this is one of the biggest reasons that people end up being in huge debt because of payday loans. If multiple borrowing can be regulated – not totally eliminated – then I suppose it would be a good thing in the end.

What are your thoughts on this?