Arizona has followed the lead of some 16 other states in regulating how much pay-day lenders can charge clients. Some pay-day lenders had been charging as much as 460% annual percentage rates, which will come to an end this Thursday in Arizona. The new rate will be limited to only 36%, a rate which has been previously imposed on banks and other lenders. But one company, Ckeck ‘n Go, says it can’t make it with such a miserly interest rate and plans on ceasing operations in the state.
A recent article stated:
Some stores already have shut their doors, and an industry spokesman said more will follow. Payday lenders left in droves from other states that have imposed similar caps.
“What you are going to see is the smaller operators with one, two or three stores will close,” said Lee Miller, a spokesman for Arizona Consumer Financial Services, a trade group that represents payday lenders. “The large companies are looking around and trying to find new products to meet the credit needs of Arizona consumers.”
Miller said that to stay in business, many payday lenders likely will offer auto-title loans, which can generate annual returns of up to 204 percent, according to state law. The Center for Responsible Lending said more than 200 payday stores in Arizona have received auto-title loan licenses in the past two years, as it became more apparent payday licensing would end. Some payday lenders also will continue to offer check-cashing services.
But some large businesses are just throwing in the towel.
Check ‘n Go, licensed under Southwestern & Pacific Specialty Finance Inc. in Cincinnati, stopped offering payday-loan services a month ago in Arizona and began closing 11 of its 34 stores on June 12. The company, which has 102 Arizona employees, plans to close all stores by the end of summer.
I find it hard to believe that any company would be allowed to charge 460% annual percentage rate for any type of loan. This smells of legalized loan sharking.
What do you think?