PRESS RELEASE – For Immediate Release
October 22, 2008

CONTACT:
Melissa Hodgdon, Arizonans for Responsible Lending (978) 476-9370

NOW WE’VE SEEN IT ALL

DESPERATE PAYDAY LOAN INDUSTRY RUNS AD ATTACKING…ITSELF?

PHOENIX – The payday loan industry, the backers of Proposition 200, began running another misleading ad to try to convince voters that voting yes on Prop 200 would reform payday loans.  But, unlike earlier ads that tout the supposed need Arizonans have for extremely high-interest loans, the latest ad attacks payday lending.  Hard.

The payday lenders obviously have realized that the $12 million they spent through September trying to convince voters of the need for payday lending isn’t working.  So, they did more polling, confirmed that Arizonans are sick and tired of usurious payday lenders, and launched an attack ad… on themselves.  More trickery.  Same bottom line.

“This latest ad from the payday industry is their last-ditch attempt to trick voters into believing Prop 200 offers any kind of reform.  That is why they are running an attack ad against themselves,” said Ken Clark, Manager of the No on 200 Campaign.  ”It’s obvious that their polling is telling them that Arizona voters are smarter than the payday industry gives them credit for.   They don’t trust the payday industry after the first $12 million they spent and they know that Prop 200 is no reform at all. The only way to vote for reform is with a ‘NO’ vote on 200.”

Watch the ad for yourself and draw your own conclusion.  You can view it at: www.200isnoreform.com/liarflyers

Below, we debunk all the mistruths, lies and deceptions in the ad:

Ad Script (1) Narrator:  Arizonans agree – Payday lenders who take advantage of hardworking families need to be stopped. * (2) On November 4th we’ll have our chance. * * * (3) Vote Yes on Prop 200 to pass hard-hitting reforms and… [On screen chyron: END RIP-OFFS] bring the payday loan industry under control. [On screen chyron: END UNFAIR PRACTICES] * * * (4) Vote yes to crack down on lenders to protect Arizona families [On screen chyron: CRACK DOWN ON PAYDAY LENDERS] * * * * * * * * (5) Vote yes to pass regulations tough enough to force the bad apples to close their doors [On screen chyron: PUT BAD APPLES OUT OF BUSINESS] * * * * * (6) Learn more. Visit reformAZpaydayloans.com [On screen chyron:  reformAZpaydayloans.com] * (7) Clean up the payday loan industry. * * * (8)Vote yes on Prop 200 * * * (9) [On screen chyron: paid for by Yes on 200, major funding provided by Arizona Community Financial Services Association]

Facts (1) This may be the one true fact in this ad. * * (2) Okay, this one is true too but not in the way the payday loan industry meant it in this ad.  Voting NO on Prop 200 is the only way to stop the payday lenders from taking advantage of hardworking families in Arizona. * (3) Prop 200 is paid for by the payday loan industry.  This initiative will not reform the industry at all and in fact will give it more power by allowing payday lenders to gain electronic access to consumers’ bank accounts. Prop 200 would authorize payday lenders to charge 391% interest – instead of capping their loans at 36% like every other lender. Make payday lenders play by the rules – don’t let them write their own! * (4) Proposition 200 would make payday lending a specially-protected industry in Arizona.  Payday lenders would become “bullet-proof” from any future regulation, and this certainly would NOT protect Arizona families. The payday industry and state & federal regulators all know that this ballot initiative would not stop the payday loan debt trap. In fact, that’s exactly why the payday industry wrote it this way. Payday lenders rely on loan flips every two weeks, something they could continue to do under Prop 200. If Prop 200 passes, the typical payday borrower will still pay back nearly $800 to borrow $300 – after multiple loan renewals. * (5) Prop 200 will not force the “bad apples” to close their doors.  In fact it would allow the entire payday loan industry (a crate of bad apples?) to continue operating in Arizona with little or no regulation.  VOTING YES WILL KEEP THE BAD APPLES IN BUSINESS FOREVER. If Arizonans reject Prop 200, the payday loan industry will have to follow the same rules other lenders follow, not get to write their own. * (6) This initiative will do nothing to reform the payday loan industry and only allows it to further gouge consumers.  The payday loan industry is trying to trick Arizona voters by calling it reform. * (7) Prop 200 allows the payday industry to write its own rules.  As a voter approved initiative, it would be nearly impossible to change in the future, making payday loans much worse for Arizona. * (8) Voting NO on Prop 200 is the only way Arizona can really reform the Payday Loan industry. www.200isNoReform.com * (9) THIS IS THE MOST IMPORTANT PART: THE ‘Yes on 200′ CAMPAIGN IS PAID FOR ENTIRELY BY THE PAYDAY LOAN INDUSTRY.  THE ARIZONA COMMUNITY FINANCIAL SERVICES ASSOCIATION IS THE ARIZONA ARM OF THE NATIONAL TRADE GROUP THAT REPRESENTS AND LOBBIES FOR THE PAYDAY LENDERS!

BACKGROUND:

Prop 200: No reform at all!

The payday lending industry is hoping that with one quick check at the ballot box, Arizonans will vote to subject themselves to triple digit interest rates indefinitely. Because of purposely vague ballot language most people won’t even realize that their vote for “reform” is anything but.

Conspicuously absent from Proposition 200 and its summary are any mention of the repeal of the payday loan sunset provision in the current statute, which is set to return payday lenders in 2010 to the 36% rate cap applicable to other consumer lenders in Arizona. This key point is hidden in legalese and vague references to section numbers. Reading the ballot language itself does not make it apparent that the core impact of the initiative would be to permanently legalize payday lending at 391% interest on a typical two-week loan.

In bundling together half a dozen inconsequential “reforms,” the payday lending industry aims to divert attention from the real issue – the indefinite perpetuation of interest rates at 400%. The proposed “reforms,” which really amount to no more than smoke and mirrors, include:

Capping the Maximum Loan Term at 35 Days. While the provision would cap the maximum loan duration at 35 days, it fails to lengthen the minimum term of 5 days.

Thus, payday loan products will persist at 391% APR or worse.

Limit to One Loan Outstanding with a Twenty Four Hour Cooling Off Period. Even with these loan rationing terms in place, a payday lender could make as many as 24 two-week loans to a borrower in a single year. These limits are no limit at all, allowing borrowers to be trapped in a cycle of interest-only payments for the full year. Research from other states that have tried similar “cooling off periods” shows that 91% of payday loans still go to borrowers with five or more transactions in a year; 62% of payday loans still go to borrowers with twelve or more transactions in a year; and 1 in 4 payday loans go to borrowers with 21 or more transactions in a year.

Current Arizona statute already limits borrowers to one outstanding payday loan at a time. However, this provision is unenforceable and remains so with Proposition 200. Under Proposition 200, payday lenders will still be allowed to look the other way and issue a new loan, even if they suspect that the borrower has an outstanding obligation with another payday lender.

Electronic Access to Borrower Accounts. While characterized by the industry as offering convenience, in reality this provision would give payday lenders unfettered debit access to customer bank accounts and facilitate overcharging through continuous fees. In addition, this provision opens the door to internet payday lending, which is dependent upon electronic funds transfers. This is worse than the current statute.

Paid for by Arizonans for Responsible Lending, No on 200
Senator Debbie McCune Davis, Chair

Major Funding by UFCW Local 99, Phoenix
Center for Responsible Lending, Durham NC, SEIU, Washington DC
and Strategic Issues Management Group, Tucson
Additional Support from Arizona AARP

www.200isNoReform.com * (978) 476-9370