AZ State Veterans Legislative Update 17 March 2016: S/E S.B. 1316 on Predatory Lending

M1 Subject for use on the Email to be forwarded: S.B. 1316 S/E: ‘consumer lending; regulation, licensure’

Predatory Lending Bill SB 1316 may come up for a Floor vote in the Arizona House of Representatives at any time. Please consider sending the message at the end of this Email to all Arizona Representatives ASAP per the instructions shown below.

Email addresses with Semi-colons for all members of the Arizona House of Representatives:

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House Addresses With Commas:

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When you are ready to forward the Message at the end of this text to all members of the House of Representatives:

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2. Then delete the Subject line of the new message, and copy: S.B. 1316: S/E: ‘consumer lending; regulation, licensure’ 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 Representatives or their staff to delete your message if you are not a constituent before they read at least the first paragraph in the message. Consider just adding something like ”Concerned Veteran and Citizen” after your name and rank. If you are a constituent of one of the Representatives, in addition to sending this Email to all House Members, please consider calling your Representative’s office with your concerns Go to or click on here. At that site, click on House and then on Members on the drop down menu) to find their phone numbers.

4. Copy Email addresses with Semi-colons for all members of the Arizona House of Representatives: above (high light the addresses of all 60 members 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.
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Draft Message

Honorable State Representative

Various Committee/Caucus testimony on SB 1316 continues to be along party lines with primarily numerous Democrats commenting on the predatory nature of the Bill, and the Bill sponsor or spokesman and very few Republicans citing the lobbyist, lending industry, and leadership mantra on their view as to the need for the legislation. It’s time to consider constituency views on the issue and to independently assess the insidious aspects of the lending industry business model that is hidden in SB 1316 instead of mostly voting on it along party lines, as appears to be happening to date. I urge you to review the following summary of pertinent detail in case some of it might be eye opening to you.

First is the widely known180% to 204% annual percentage rates (APR) that is not directly mentioned in the Bill.

And then there is the insidious nature of the minimal initial principle payment on the loan and the impact it has on the resulting interest accumulation over the 24 monthly payments allowed by the legislation.

For example, on an unsecured $2500 loan, at 17% per month interest (204% APR) as allowed by SB1316, the first monthly interest payment will be $425 and the first monthly principle payment will be $10.05. That $10.05 initial principle payment, when added to the first month’s interest payment ($425) becomes the total monthly loan payment ($435.05) that remains constant over the term of the loan.

That minimal initial principle payment ($10.05) is automatically determined in the loan amortization process such that increasing it incrementally each month by the amount that the interest payment decreases (to keep the loan payments constant) cumulatively adds up to the $2500 amount of the original loan with the last loan payment.

But due to the predatory nature of this business model where monthly loan payments remain at $435.05 through all 24 payments, even with the monthly interest payments decreasing each month (because of the monthly principle payments) the interest on the loan will accumulate to over $7,900 over the 24 month term of the loan. That’s over three times the amount of the $2500 loan. See Page 2 of the attached.

While the small initial monthly principle payment (beginning at $10.05) benefits the borrower by keeping the monthly payments to a minimum, it’s that huge cumulative $7900 interest payment that is the insidious nature of the predatory lending industry business model.

And it’s a similar situation with a $500 unsecured loan over 24 months. The initial monthly principle payment would only be $2.01 (one fifth of what is required on a $2500 loan). That results in about $1,600 in interest payments over the 24 month term of the $500 loan. That, like on a $2500 loan, is over 3 times the amount of the loan.

And here is why the lenders business model will not encourage starting off with a higher principle payment. For example, if the initial principle payment were increased to $20.05 on a $2500 loan, instead of $10.05, the total interest over 24 months would decrease by about $1600. And on a $500 loan if the initial principle payment were to be $10.01,for example instead of the normal $2.01, the loan would be paid off in 15 months. And the total interest payment over that time period would only be about $860. That’s only about one half of what it would be if the loan started with a $2.01 initial principle payment and was paid off over 24 months. Similar scenarios result for any loan amount whenever the initially required monthly principle payments are increased.

And with that lending industry business model we won’t see them encouraging beginning with a higher initial principle payment or early payoff of the loan balance. That’s because it would reduce the total amount of interest to be paid over the 24 month or shorter period of the loan. So it is definitely in the interest of the lender to have the payments extended over 24 months as allowed by the Bill, starting off with the resulting relatively small monthly principle payments that, of course, is intended to appear to be in the interest of the borrower. But it is primarily to the benefit of the lender, as part of their business model, to see a minimal initial principle payment and payback extended over 24 months as allowed by the Bill. So, with this business model, you can be assured that the lender will not be encouraging a larger initial principle payment or early pay off of the loan or offering lower percent per month interest rates. And while it’s usually beneficial to bring new industry to Arizona, as some of your leadership are advocating as a major reason to support SB 1316, we don’t need this kind of predatory lending business in Arizona.

Please join me and other concerned Arizona citizens and probably most of your constituents in opposing SB1316.


2016 AZ SB 1316 CFA Facsheet