AZ State Veterans Legislative Update 26 February 2016: S/E S.B. 1316- Predatory Lending

Subject:         S.B. 1316: S/E:  ‘consumer lending; regulation, licensure’

       

     Predatory lending is back on the State Legislative agenda, this time in the House.

 

And while it probably does not apply to you personally, please consider how it will affect some other 

Veterans and others in need of temporary financial help, and join us in helping to defeat this new Predatory Lending Bill.

 

 

Arizona Senate Bill S.B. 1316: Strike Everything: ‘consumer lending; regulation; licensure’ is another attempt by payday lenders and their lobbyists to ram through an amendment to Arizona Revised Statute (A.R.S.) that would allow predatory lenders to make high interest secured and unsecured loans. We were instrumental in stopping the earlier version (S.B. 1447) in the Senate Finance Committee on 10 Feb.  However, the payday lenders are continuing to disguise their predatory product by calling it a “Flexible Credit Loan”. It’s really a DEBT TRAP, particularly for veterans and other families in need for temporary financial help. In 2008 we were instrumental in killing outrageous fees ‘Payday Loans’ in Arizona, and 60% of Arizonans voted to cap interest rates at the Federal 36% annual interest rate, banning predatory consumer loans. And in 2015 we were instrumental in killing H.B.  2611 ‘consumer flex loans’. and we were instrumental in killing S.B. 1447 in the Senate Finance Committee earlier this month on 10 February. Now it’s time to stop a nearly identical Strike Everything Bill (S.B. 1316) early in its path to a full House vote.

 

The full 21 page (PDF Version) text of S.B. 1316 can be accessed by searching on www.azleg.gov in your browser. At that site, click on “Bills” then click on “Bill Info” in the drop down menu. At the next screen under Senate Bills click on “SB1301 through SB1350”. At the next screen, then scroll down and click on “S.B. 1316”. At the next screen under “Proposed Amendments” click on ”HOUSE PROPOSED AMENDMENT: Ways and Means – Strike Everything” then click on HTML or PDF, or you may be able to just click on HTML or PDFhere when you are ready to view it.

 

While not readily evident, S.B. 1316 (like S.B. 1447)  would allow so called ‘Flexible Credit Loan’ annual percentage interest rates of 180% on secured loans and 204% on unsecured loans. While the bill mentions “Annual Percentage Rate” at Section 6-1801. 2., and at Section 6-1809 where they require lenders to “REPORT THE LICENSEE’S AVERAGE ANNUAL PERCENTAGE RATE”, no place in the Bill do they mention what the maximum “Annual Percentage Rate” is

Only at Section 6-1832  Finance Charges near the end of the document do they give a hint (hidden to most as was the case last year and earlier this month) at what that ‘Annual Percentage Rate’ is, where it says:

 

6-1832. Finance charges

  1. A LICENSEE MAY CONTRACT FOR AND RECEIVE FINANCE CHARGES ON A

FLEXIBLE CREDIT LOAN THAT DOES NOT EXCEED THE FOLLOWING IF THE ORIGINA

PRINCIPAL AMOUNT OF THE FLEXIBLE CREDIT LOAN IS AT LEAST FIVE HUNDRED DOLLARSBUT NOT MORE THAN TWO THOUSAND 

FIVE HUNDRED DOLLARS:

  1. A RATE OF SEVENTEEN PERCENT PER MONTH IF UNSECURED.
  2. A RATE OF FIFTEEN PERCENT PER MONTH IF SECURED WITH PERSONAL

            PROPERTY.

  1. A LICENSEE MAY NOT COMPOUND FINANCE CHARGES.

 

And these equate respectively to 204% (17% X 12 Months) and 180% (15% X 12 Months) ‘annual percentage rates’.

 

That’s exactly the kind of abusive debt trap lending that this Strike Everything Bill would allow. Since 2008, when we were instrumental in killing “Payday Loans”, lenders in Arizona have been trying to evade the voters’ will by seeking out loopholes.  Now these predatory lenders again want to charge outrageous fees, and we can’t let them do that.

 

Debt trap lenders market their loans as a one-time quick fix, but the interest rates and fees are so high borrowers often end up not being able to afford to pay off their loans and cover their normal living expenses. They often end up in the debt trap taking out loan after loan after loan, paying new fees each time. It’s perfectly clear that this is what these payday lenders will do.. We know these loans can do real harm in our communities.

 

And again, we and the voters have spoken loud and clear in 2015 and 2008 on this issue.

 

Please consider calling and/or emailing members of the House Ways and Means Committee to make your voice heard to oppose  S.B. 1316. We don’t want debt trap lending in Arizona. Don’t delaybecause the bill is scheduled to be heard in the House Ways and Means Committee on Monday 29 February at 0900.

 

House Ways and Means Committee Member names, Email addresses. and phone numbers:

 

Reginald Bolding Jr            rbolding@azleg.gov            (602) 926-3132

Mark A. Cardenas                mcardenas@azleg.gov       (602) 926-3014

Anthony Kern                       akern@azleg.gov                 (602) 926-3102

Javan D. “J.D” Mesnard      jmesnard@azleg.gov          (602) 926-4481

Darin Mitchell                       dmitchell@azleg.gov           (602) 926-5894

Justin Olson                         jolson@azleg.gov                (602) 926-5288

Michelle B. Ugenti-Rita       mugenti@azleg.gov            (602) 926-4480
Jeff Weninger                       jweninger@azleg.gov         (602) 926-3092

Bruce Wheeler                     bwheeler@azleg.gov          (602) 926-3300

 

Please consider following the guidance below to send the recommended message (or edited if desired). Please send the message to the House Ways and Means Committee members today, this evening or ASAP this weekend so that our Emails will be at the top of their “In Boxes” on Monday morning when they arrive at work.

 

I have drafted text for an Email (below) that I recommend you review (and edit if desiredafter it becomes the only text left in the Email to be sent to the Committee Members.

 

 

House Ways and Means Committee Member Email addresses:

rbolding@azleg.govmcardenas@azleg.govakern@azleg.govjmesnard@azleg.govdmitchell@azleg.govjolson@azleg.govmugenti@azleg.govjweninger@azleg.govbwheeler@azleg.gov

You might want to print this Email now to have the instructions below available to facilitate using this process.

Guidance for processing and sending your Email.

When you are ready to forward the Message at the end of this text to the House Ways and Means Committee Members:

 

  1. Click on “Forward”from this message so that the attachment will be included with the message that will then be ready for final processing for sending. (Note: Clicking on “Forward” doesn’t send the message. It only sets it up to complete the processes below before hitting “Send”).
  2. Then delete the Subject line of the new message, and copy: S.B. 1316:  S/E:  ‘consumer lending; regulationlicensure’ here or at the beginning of the text of this Email and paste it on the Subject line.
  3. Edit the message that appears below the blue line below if desired, and enter your name (and retired Rank if you are a Military Retiree) after the word ‘Respectfully‘ at the end of the message. Enter your address if desired, but that might tend to make the Senators or their staff to delete your message if you are not a constituent before they read at least the first sentence in the message. If you are a constituent of one of the Representatives, in addition to sending an Email to all of Committee Members, please consider cons calling your Representative’s office with your concerns
  4. Copy the nine House Ways and Means Committee Member Email addresses: above (high light the whole line of 9members and then hit ‘Ctrl’ and ‘C’ simultaneously), and paste it on the Bcc: line (put your cursor on the Bcc: line above and then hit ‘Ctrl’ and ‘V’ simultaneously.
  5. Now High Light the blue line shown below (place your curser just below the blue line) and sweep upward acrosseverything above it.
  6. Then hit “Delete” on your keyboard . That will leave just the Draft Message that now appearsbelow the blue line as the text of your new Email.
  7. 7.Then when you feel comfortable that you have completed all the steps correctly, you can hit “Send” to send your Email.

 

Draft Message

 

 

While I as a Veteran may not be one of your constituents, but as a member of the House Ways and Means Committee representing all Arizona citizens, I am seeking your support in opposing Senate Bill S.B. 1316: S/E: ‘consumer lending; regulation; licensure ‘. S.B. 1316 is an attempt by predatory payday lenders and their lobbyists to ram through an amendment to Arizona Revised Statute that would allow predatory lenders to make extremely high cost loans in Arizona.

 

While S.B. 1316 prohibits making loans having an annual percentage rate greater than 36% to members of the US Armed Forces, their dependents and Guard and Reserve personnel on active duty (Section 6-1811. D.), payday lenders and their lobbyists are trying to open the door to a predatory lending product calling it a “Flexible Credit Loan” that’s really a DEBT TRAP, particularly for veterans and other families in need for temporary financial help. In 2008, 60% of Arizonans voted to cap interest rates at the Federal 36% annual interest and to ban predatory consumer ‘payday loans’. And in 2015 we were able to kill House Bill H.B. 2611 ‘consumer flex loans’.

 

While S.B. 1316 requires lenders to annually report their “average annual percentage rate” (Section 6-1809), nowhere in the bill do they quote what the maximum annual percentage rate is.  Only in Section 6-1832  do they specify: “a rate of 17% per month if unsecured” and “a rate of 15% per month if secured with personal property”. Not readily evident to some, these equate respectively to 204% and 180% annual percentage rates.

 

For example, on a one year $1000 secured loan, if only the 15% monthly interest is paid monthly until the time the $1000 loan must finally be paid off in one lump sum at the end of the term of the loan, especially when the borrower is extremely hard pressed at the time of  taking out the loan, the borrower will have paid $1700 in interest on the $1000 loan. However as with most loans, higher monthly payments include a portion of the principle in addition to the required interest (sometimes with a relatively large lump sum final principle pay off as part of final payment), the cumulative 15% monthly interest over the year will be somewhat less than $1700 in interest to pay off the $1000 loan.

 

As an example, the attached contains several amortization tables including for example Figure 2. on the second page, That table shows that for an unsecured loan of $2500 over a two year period, (the max authorized by this legislation), the borrower would pay a total of $10,441.15 in monthly payments, including $9,441.15 in interest to pay off a $2,500 loan over two years.

 

That’s exactly the kind of predatory lending this Bill would allow. We can’t let them do that.

,

Faith leaders, veterans groups, and responsible civic leaders across the state are opposed to abusive loans like S.B. 1316 would legalize. Predatory Loans have no place in Arizona and voters have said so, loud and clear in the past. And it’s time to do so again.

 

Please vote to oppose S.B. 1316 in the House Ways and Means Committee.

 

Respectfully,