*State Veterans Legislative Update 22 March 2016: SB 1316 S/E | MOAA CORONADO – MOAA 5 STAR LEVEL OF EXCELLENCE AWARD AND FIVE STAR COMMUNICATIONS AWARD FOR 2023

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

Predatory Lending Bill SB 1316 Passed in the House by 31 to 26 with 3 not voting on 21 March.

Now it will be up for a Floor vote in the Arizona Senate at any time. Please consider sending the message at the end of this Email to all Arizona Senators ASAP per the instructions shown below.

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

Senate 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 Senate:

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”).
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.
Edit the message that appears just 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 Arizona Veteran” after your name and rank. If you are a constituent of one of the Senators, in addition to sending this Email to all Senate Members, please consider calling your Senator’s office with your concerns. Go to or click on www.azleg.govhere. At that site, click on Senate and then on Members on the drop down menu) to find their phone numbers.

Copy Email addresses with Semi-colons for all members of the Arizona Senate:above (high light the addresses of all 30 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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Now High Light the blue line shown below (place your curser just below the blue line) and sweep upward acrosseverything above it.
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.Then when you feel comfortable that you have completed all the steps correctly, and have added your name at the end of the message, you can hit “Send” to send your Email.

Draft Message

Dear Senator,

Senator Kimberly Yee was key to defeating SB 1447 in committee in the Senate when she stood by her convictions, and in opposition to political correctness, to vote against that predatory lending Bill on10 February, only to subsequently be targeted by lobbyists and the lending industry as being anti-business and against free enterprise which we all know is not so. Please stand by Senator Yee’s opposition to SB 1447 with your own convictions to vote (when it hits the Senate Floor) against the strike everything SB 1316 S/E: consumer lending; regulations; licensure bill that was the vehicle to carry that predatory lending, so called ‘flexible credit loan’ bill, through numerous political correctness votes in the House and subsequent forwarding to the Senate on 21 March. It’s time to move away from political correctness, and stand up to the lobbyists and lending industry. Please consider your constituency views on the issue, and independently assess the insidious nature of the lending industry business model that is hidden in SB 1316 S/E. Below is a brief summary of pertinent detail to help refresh your memory on that aspect of this issue.

First, some believe that 15% and 17% interest per month for secured loans and unsecured loans respectively as reflected in the Bill seems reasonable. What they forget is that those monthly rates equates to 180% and 204% Annual Percentage Rate (APR) respectfully, and that is not mentioned anywhere in the Bill. And that is not reasonable under any circumstances.

And then there is the insidious nature of the minimal initial principle payment on the loan and the huge 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 monthly 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 $20.05on 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 they 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 House leadership has been 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.

Respectfully

2016 AZ SB 1316 CFA Facsheet