Private money lenders licenses all just ended in Arizona. The state is also letting payday stores move out while they close their doors. Obama’s signature is the only thing that the financial reform bill needs to pass. Part of the bill will create a new consumer financial protection agency within the Federal Reserve that will regulate consumer lending, and there is concern that a fate similar to Arizona payday lenders’ awaits all payday loan company nationwide.
Stores in Arizona closing
The effects of the usury cap proposed by Arizona were put into one article on azcentral.com. At 36 percent interest, or rather, 36 percent annualized interest (on a two week loan), any payday loan companies in Arizona are having a hard time keeping their doors open. 11 of 34 Check’N'Go stores that has pay day loans, check cashing, and cash advances, closed. 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.
The unsigned financial reform bill
The Federal Reserve will have a new Consumer Financial Protection Agency in it with the financial reform bill. The bill, just lately passed by the Senate, is awaiting the President’s signature. Payday lending will then fall out of the hands of the states, and into Federal jurisdiction. Money lenders will no longer be a business if the rate cap used by Arizona were to be considered by Federal government for law.
Who wants the ban?
Cash today loans may have to follow standards used by other lending, or some believe awful loans and high interest can be gone. Too bad it wouldn’t work since only a few dollars would be made off each and every $100 loaned and it costs $14 to lend $100. If short term lenders can’t stay open, what is going to replace it to help the people who need these so badly?
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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
