It’s a bill that would enable those who are hard up for cash to borrow money, but at a high price. With interest rates of up to 200 percent or more, many refer to these small loans as “predatory loans”, and victims say it’s a vicious cycle -- one that leaves them in a bigger financial crunch than when they started.
It’s been debated by lawmakers for years, since payday loans became illegal in Arizona in 2010. Lenders came back with auto title loans and registration loans, giving people the ability to continue borrowing money, using their cars as collateral.
Supporters say there’s a compelling need for additional lending choices for consumers. This gives people with no access to traditional banking and those with damaged credit histories the ability to access smaller loans in an environment that is better managed than it was before. The loans are capped at about $3,000 and the terms to pay them back capped at about 24 months.
The Committee of the Whole held a hearing on the Senate bill 1316 on Tuesday. Knoye Jackson, a Goodyear woman who had testified before lawmakers at previous hearings, said she hoped the bill would be squashed before going any farther.
“I think they trap you because they make it seem like, come and get this good money so you can get caught up on your bills, but you never get caught up,” said Jackson.
She said she paid the price and got caught up in the “predatory lending” cycle, after taking out a $700 loan to pay some bills and get “caught up” on her finances.
“Those loans don’t bring you out of debt, they put you in debt,” said Jackson.
The $700 ended up becoming $7,000 in three years. Jackson said her $80 payment every week was simply paying the interest she was incurring. None of it went toward paying down her actual loan.
“They’re getting richer by charging you all of this money. We’re getting poorer,” said Jackson.
Her story ended with her car getting repossessed and a bankruptcy filing. Now Jackson said she wishes she would have just called the utility company she owed money to and arranged a payment plan instead of getting a loan.
“I think that we just need to educate people on different things that they can do. You can places where you can get credit counseling, they could get on a budget plan,” said Jackson.
The bill will now go before the House for a vote.
