Opinion: Say 'no' to triple-digit interest rate loans

Google “car title loans Tucson” and be prepared to be outraged.

Even though Tucson voters joined other Arizonans to defeat payday lending by 2-to-1 at the ballot in 2008, the predatory lending industry still hasn’t accepted defeat. Instead, predatory lending has become a game of whac-a-mole in Arizona and unfortunately it is Arizonans that are getting whacked.

Year-after-year the predatory lending industry tries to reinstate triple-digit payday loans, devise a new loan scheme or expand current consumer-gouging industries, such as auto title lending.

Fortunately, a broad coalition led by the Southwest Center for Economic Integrity based here in Tucson, along with St. Vincent’s de Paul Society-Tucson Diocese, the Primavera Foundation, veterans and military associations and many others across the state and nation are working together to beat back predatory lending once and for all. And for good reason.

The Arizona PIRG Education Fund recently reviewed nearly 10,000 predatory lending complaints from across the country in the Consumer Financial Protection Bureau database. Two-and-a-half years worth of data revealed problems with a full spectrum of predatory products and services, including storefronts and online lenders, short-term payday, long-term payday installment loans, and auto title loans.

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The analysis of consumer complaints about predatory lending to the CFPB shows a critical need to rein in high-cost lending. The Arizona PIRG Education Fund analysis of written complaints to the CFPB found significant evidence of the major problem with predatory lending: borrowers can’t afford these loans and end up trapped in a cycle of debt. Ninety-one percent of written complaints were related to unaffordability, including abusive debt collection practices, bank account closures, long-term cycles of debt, and bank penalty fees.

The good news is that the CFPB recently proposed a rule that takes a historic step by requiring, for the first time, that payday, auto title, and high-cost installment lenders determine whether customers can afford to repay loans with enough money left over to cover normal expenses without re-borrowing. CFPB’s proposed rule also includes a number of important provisions which allow Arizona the ability to offer stronger protections than the federal government against traditional payday lending; focus on preventing the debt trap, the most abusive aspect of high-cost lending; and include a number of provisions to prevent lenders from evading the rule.

The bad news is that as currently proposed payday lenders will be exempt from the ability-to-repay standard requirement for up to six loans a year per customer. To truly protect Tucson residents and other consumers from the debt trap, it will be important for the CFPB to close this and other loopholes. Otherwise, a weak rule will lend undeserved legitimacy to predatory products and practices and open the door once again for payday lenders to operate with impunity in our state.

The best way to address abusive payday, car title, and other forms of predatory high-cost lending is to end it for once and for all.