KINGMAN - The clock is ticking for payday loan businesses in Kingman. With less than 48 hours to go before the law allowing them to do business expires, payday loan stores, both big and small, are preparing for a seismic shift in their business models.
The stores have been facing their demise all year, following failed attempts to woo voters and state lawmakers into extending the 2000 law that allowed them to charge upwards of 390-percent interest on small monetary loans. The law expires July 1, giving payday customers until Wednesday to either settle their accounts or face collection agencies.
For most major payday loan chains, such as the 1 Stop Check Cashing Payday and Title Loans at 3505 Stockton Hill Road, the loss of payday loans will not necessarily mean the end of business. 1 Stop is among several chains that plan to simply phase payday loans out of their model and turn to other services such as auto title loans, money orders and vehicle registrations.
But that hasn't been the case for one major chain. Check 'n Go stopped offering payday loans last month and has since announced the closure of all 34 of its Arizona locations by the end of summer. According to one employee, the local Check 'n Go at 1949 Beverly Ave. is scheduled to close as early as the end of this week, following at least a dozen other locations around the state that have already closed this month alone.
In an interview with the Arizona Republic earlier this month, Check 'n Go spokesman John Rabenold said the 36-percent interest rate cap imposed by the law's expiration would simply make it impossible for payday stores to continue offering their product and still expect to survive financially. The same also goes for smaller, independently-owned payday stores, which are now considering other options, including following Check 'n Go out of the state.
Dick Stephens of B-4 Payday is one of those independent owners. Stephens said he already closed his Kingman store at 3880 Stockton Hill Road on June 5, and plans to shutter his Bullhead City location after Wednesday. He said he plans to reopen his store by the end of next month in Laughlin, where Arizona's new payday lending restrictions won't apply. But he anticipated the move would not come without a cost, with the driving distance alienating a large percentage of his customer base.
"I'm assuming I'll lose probably 60 percent of my business from Kingman," Stephens said.
Stephens estimated he has serviced about 1,000 customers between Kingman and Bullhead City, the majority of them senior citizens on fixed incomes and lower-wage families trying to make ends meet.
"Most of our clientele is either retired seniors or working people who go week to week," he said, adding that most of those clients have been scrambling to pay off their outstanding loans before the Arizona law expires. "It hasn't been too bad. We've had a few problems, probably 5 percent of our clients have had trouble paying us off. But Terry Goddard's been treating us like criminals, sending out warning letters threatening us with $20,000 fines if we do a loan past July 1."
Attorney General Goddard has been among the state's most vocal champions in favor of abolishing the payday loan industry, arguing that its sky-high interest rates and appeals to those already in precarious financial straits have done more harm than good to Arizona's most vulnerable citizens over the past decade. As the payday law's sunset date draws closer, Goddard, himself a Democratic candidate for governor, has launched a high-profile enforcement campaign dubbed "Operation Sunset" aimed at ensuring remaining lenders adhere to the ban on consumer loans that exceed the state's annual percentage rate limit.
"I will use every tool at my disposal to enforce the end of exorbitant payday loans in Arizona and seek fines and penalties against those who try to continue this abusive practice," Goddard said in a statement June 9. "I encourage citizens to report violations to our office. Our enforcement will be swift and aggressive."
Goddard has named auto loans, prepaid debit cards and online accounts as among the alternatives payday lenders have used to skirt the laws in other states that have outlawed the stores. One part of "Operation Sunset," he said, will be to ensure these same practices don't take hold in Arizona.
That's been the experience for at least one local payday employee who preferred not to be named for this story. According to the employee, the lender she works at assured its customers they would be able to set up online accounts following the law's sunset, only to receive a letter from Goddard's office demanding they cease the practice. According to Goddard, as of Thursday, no business will be able to make payday loans over the Internet to Arizona customers, regardless of where that business itself is located.
At the same time, however, the payday employee said many customers are still seemingly unaware that the law is about to expire. In fact, customers are still coming in to attempt to renew their loans, and new customers are even coming in to seek first-time loans, not realizing the practice has all but ceased here.
But for all the short-term pain and confusion the sunset is likely to cause regular payday customers, advocates in favor of their abolition argue that the move will ultimately help pave the way for more traditional lending institutions to bridge the gap.
"I'm a believer that the market does address supply and demand pretty well on its own," said David Higuera, political director for Arizonans for Responsible Lending, a 527 political action committee devoted to ending the payday practice. "The playing field right now is so uneven, it might as well be a wall, because payday lenders are operating under a completely different statute that only applies to them. It's an attack on the free market, different rules for different lenders."
With paydays gone, however, Higuera said traditional lenders are more likely to be willing to work with smaller, shorter-term loans, even though they may never be quite as flexible as the unsecured payday loans could afford to be. But even that may not necessarily be a bad thing.
"Payday lenders will always say they're filling a need for short-term loans," Higuera said.
"Research that's been done nationally shows that 76 percent of payday loan volume nationally is based on churned loans to repeat borrowers. What that says to me is there is not the demand they want you to believe - the 'demand' is there because people are already beholden to them."
Reader Comments
Posted: Thursday, July 01, 2010
Article comment by:
PIZZLE PIZZLE
What a crock. I used these services from time to time for birthdays, Christmas, or other times I wanted to splurge a little on myself. Theyre great and the APR isnt bad at all if you pay it back when you agreed to in the first place. If you keep refinancing over and over its YOUR choice to do so and no one asked you to.
If MORONS cant manage their money why should I be affected. Its their fault for not being able to pay it back, its not like they were tricked.
If youve ever used one of these places, they try to make the repayment rules VERY clear and most have them in HUGE lettering on the walls.
So once again, because leftists think "people need to be protected from their own idiocy" a service I used and enjoyed is gone.
You idiots that are against payday lenders- its the same logic people use that are for gun control. Just because 1% of the population is too dumb to handle them doesnt mean that it should be restricted for EVERYONE.
Oh well, hope you like your nanny state gvt. Arizona legislature & voters always seems to do one good thing, one stupid thing, one good thing, one stupid thing in that order.
Posted: Wednesday, June 30, 2010
Article comment by:
Allan Gleason
@ Stupidity Drives me crazy!
You suckered to Cool Indifference. He most certainly was kidding because what he said was pure nonsense!
And yes, the old usury laws must be re-established. For many, many years they amounted to a maximum of 1.5% per month or 18% per year on the unpaid balance. But then the banks and especially the credit card industry talked Congress into eliminating them!
Posted: Wednesday, June 30, 2010
Article comment by:
been there done that you know me
pay day loans........in the service these were just loan's, which helped both the borrow er and lender............................. we even had our own going rates ,,, hence the correct name should have been called {juice}. which of course was illegal, back then. Today the term is interest and all of us are for that right??? I know it's right because we the people made it legal....or did someone slip one by us? Mr.C
Posted: Wednesday, June 30, 2010
Article comment by:
Think about this
Duhhh....Dont take half the library home with you ......Duhhh.
Posted: Wednesday, June 30, 2010
Article comment by:
payday hell
Cool indifference, the only difference between payday loans and libraries- You have to pay money to extend the check, with libraries, if you want to finish reading/watching the material you checked out, take them all back and renew them~FREE. No money involved. And, last I checked, libraries actually help the community. Not charge them out the A** and keep them in this vicious cycle.
Posted: Tuesday, June 29, 2010
Article comment by:
Stupidity Drives me crazy!
@ Cool indifference, Yes let's ban libraries so that the low income children in this town have nowhere to pick up reading material because new books are very expensive. Oh and let's not forget that we should ban libraries so that these same low income children (many whose families don't have or cannot afford internet) have no way to find research for their projects! Also let's not forget to hurt all of the people that just love to read! I am sorry but if you cannot finish all your material in the amount of time allotted don't check out so much! And get a life seriously!
Posted: Tuesday, June 29, 2010
Article comment by:
Warren O
'"Most of our clientele is either retired seniors or working people who go week to week," [Stephens] said'
Victims. Not clientele.
Posted: Tuesday, June 29, 2010
Article comment by:
Cool Indifference
BAN LIBRARIES! Or at least have them regulated by the federal government. You don't have to have good credit or a checking account or an auto title or even a job to borrow from them. In my county, they'll let you check out up to 25 books and 10 DVDs for three weeks! At $20 a book and $10 a DVD, THAT'S A $600 LOAN - more than a Payday Loan in most States! Then, the library screws you after three weeks with a $.25 FINANCE CHARGE, EVERY DAY on EVERY ITEM!
"But it's just a quarter and I want to kept those books an extra week so I can finish them. The library is out of my and I don't want to waste my time today, so I'll pay those extra quarters", you'll say. That $.25 a day on a $20 book is equivalent to 456% APR! On a $10 DVD, it's 913% APR! And on a $5.99 paperback book, it's 1523% APR!!
If you borrow the maximum amount you can borrow - which obviously, everyone does with a subprime lender - you could end up paying $8.75 in finance fees a day (35 items x $.25 a day). That equals $262.50 A MONTH!
"Ooooohhh.... but they let you renew for free!", you'll say. Not true on popular, in demand items that other people are waiting to borrow. Three weeks max and then 400-1500% interest!
LIBRARIES ARE A SCAM! In my State, there are MORE LIBRARIES THAN STARBUCKS! What is the deal? Why are these library places just popping up everywhere? Obviously, too many people enjoy the "convenience" of their service and are willing to pay the cost. But these places MUST keep growing because they are OBVIOUSLY taking advantage of repeat borrowers! Way too many people in the United States are too ignorant to protect themselves from being sucked into the library system's predatory lending. "Predatory???", you scream? Advertising for your local library is just as predominant as any other sub-prime lending (just not as honest). In fact, money-grubbing Libraries start suckering in clients THE DAY THEY ARE BORN!
The federal government needs to intervene to protect us all from these places!
Posted: Tuesday, June 29, 2010
Article comment by:
of couse
Loan Sharks always have a plan B.
Not to worry they will have many ways to get around the laws and still charge outrageous interest.
Dont use these people if at all possible. You Will be sorry.
Posted: Tuesday, June 29, 2010
Article comment by:
They already have it figured out
Not to worry. If you still need a payday loan some of these businesses are now offering a registration loan. Same thing as a payday loan only you have longer to pay it off.
