Legislative Alert - What States are Negotiating with the Payday Loan Industry

Payday Loan Industry in the News

It seems to be nearly impossible these days to turn on a newscast or listen to a radio program or pick up a newspaper without finding that some state or legislative body is focusing attention on the payday loan industry one way or the other. Most of the attention tends toward the negative, but the information provided is usually fairly complex, including percentages and timetables. Here’s a quick way to sort through what some of the issues are focused on.

Zoning Regulations

One of the complaints about the payday loan industry is that the lenders seem to be targeting poor or working class individuals who are the least able to afford the high interest rates that come with a payday loan. In Memphis, an ordinance is being considered that will limit the areas where payday loan stores can be set up, specifically placing them in more affluent areas rather than in the poorer neighborhoods.

Interest Rate Limitations

This is one type of legislation that can be found in multiple places across the country. It addresses the primary complaint about payday loans - that their interest rates are high enough to be considered predatory in nature and significantly more of a harm than help to those that use them.

Outright Banning of Payday Loans

A few states have severely threatened the payday loan industry with proposed legislation that would ban the practice altogether. In Arizona, the law that allowed the payday loan industry to operate in the state was set to “sunset” or expire, in 2010. With the recent election, a proposition was put on the ballot that would have extended that law and allowed them to continue to operate beyond 2010. Voters in Arizona denied the proposition so as it currently stands, lenders in the state will have to stop doing business in a little more than a year or agree to reduce their fees to the equivalent of a 36% APR maximum.

Will Payday Loans Continue?

The Payday Loan industry is very large and well-funded. If you are one of the thousands of Americans who use payday loans responsibly and enjoy the convenience they offer, don’t worry, they aren’t likely to be going away anytime soon.