Committee fails to endorse small-installment loan bill
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By JONATHAN J. COOPER
Cronkite News Service
PHOENIX (Monday, March 2) _ Lawmakers on Monday failed to approve a bill that would have created a new type of small-installment loan.
HB 2608, sponsored by Rep. Andy Biggs, R-Gilbert, would have allowed companies to lend $200 to $3,000 for up to two years at interest rates ranging from 51 percent to 113 percent, depending on the loan size and terms.
It foundered on a 4-4 vote in the House Banking and Insurance Committee, with Rep. Doug Quelland, R-Phoenix, joining three Democrats voting against it. Quelland, the committee’s vice-chairman, didn’t explain his vote and quickly left the hearing room after the meeting.
“It’s dead for now,” Biggs said. “That was a little bit unexpected.”
Supporters of Biggs’ bill were quick to point out that the loans it would have authorized are different from payday loans that allow consumers to post-date checks and receive a cash advance at annual interest rates upwards of 400 percent.
Biggs’ bill would have created a new type of loan product paid back in installments. Supporters said the new loans would face more regulations than payday loans and would require lenders only loan money to qualified borrowers.
Payday loan providers face a July 1, 2010, termination date for a licensing program that makes those loans possible. In November, Arizona voters defeated an industry-backed referendum that would have repealed that end date.
Biggs said there is a real need for some people to borrow money, even at high rates, for emergencies.
“Where will they turn to?” Biggs said. “We’ve been waiting for the traditional financial industry to step in and meet those needs, but they’ve failed to act so there is a hole in the market.”
Opponents said the actual interest rates on such loans could be much higher if borrowers face late fees or renew the loans.
“What we’re saying to the public in Arizona is, ‘Let’s open up the doors to loan sharks,’” said Rep. Robert Meza, D-Phoenix, who joined Quelland and Democratic Reps. David Bradley of Tucson and Cloves C. Campbell Jr. of Phoenix in voting no.