Loan lenders licenses all just ended in Arizona. The state is also letting payday stores move out while they close their doors. Currently, the financial reform bill is awaiting the president’s signature. The majority are worried that pay day loan will become obsolete if the bill passes since the bill works with the Federal Reserve to regulate lending.
Ending business in Arizona stores
azcentral.com posted an article all about effects the percentage rate cap Arizona wants may have. At 36 percent interest, or rather, 36 percent annualized interest (on a two week loan), any payday lender in Arizona are having a hard time keeping their doors open. Check’N'Go, one of the largest pay day loans, cash advance loans and check cashing franchises in the country, right away closed 11 of its 34 locations. With summer coming to a close, 100 Arizona employees will be out of work adding to the unemployed list. The stores left have to switch to car title loans if they want to stay in business. Studies have shown greater incidents of bankruptcy, bounced checks and debt collections after bans on payday credit.
Information on the financial reform bill
Part of the financial reform bill is a new Consumer Financial Protection Agency, that can be housed inside the Federal Reserve. Obama needs to sign the bill now that it has made its way through Senate. After it is signed, the Federal government could be entirely in charge of how payday loan company goes. If the rate cap Arizona began goes out to the whole country, loan company will die.
Who will the ban benefit?
Awful loans and high interest being gone is what most believe is the best part, although the truth is that cash advances can have to abide by the exact same laws as mortgages and credit cards now. It costs $14 to lend $100 and with the 36 percent APR cap, only a couple dollars can be made off $100 loaned meaning the business would lose a lot of money. If short term lenders can’t stay open, what is going to replace it to help the people who need these so badly?
More information about this topic at these websites
Further reading
AZ Central
azcentral.com/community/phoenix/articles/2010/06/27/20100627payday-lenders-quit.html
Consumer Affairs
consumeraffairs.com/news04/2010/07/payday_loans_finreg.html
