Operation Sunset to end payday lending in Arizona


Operation Sunset is set to end payday lending in Arizona. What will the effects be? Image from Flickr.

In June of 2000, the Arizona legislature approved a bill that gave payday lenders 10 years of authorization to operate within the state. In November of 2008, Arizona voters defeated a ballot proposition that would have extended this authorization indefinitely. As of June 30, 2010, payday lenders in Arizona will no longer have legal authorization to operate.

New lending limits in Arizona

As of June 30, 2010, lenders in Arizona will be required to comply with several new regulations. All loans, including short-term loans, will be limited to 36 percent interest plus 5 percent for administrative expenses. Auto title lending and prepaid debit cards are two forms of short term credit that will still be available to customers in Arizona. The Arizona attorney general has set up a Facebook page, website and tip line where they are encouraging citizens to report any lenders they believe are operating outside the new legal framework.

The effect on payday lenders in Arizona

Currently, there are 75 companies in Arizona with licenses to operate payday loan stores. These 75 companies have about 650 operating locations. Of those storefront locations, about 200 have filed applications to convert their licenses to either auto loan businesses or pre-paid debit card providers. Some businesses have indicated they intend to stay open and will try to offer short-term credit at the 36 percent interest rate cap. Most credit providers will be shutting down, however. This means approximately 1,000 lost jobs within the state. The Arizona Operation Sunset representatives have stated that the Attorney General will be scrutinizing the terms and conditions of all short-term credit transactions.

The financial reality of payday lending in Arizona

Arizona’s Operation Sunset claims that by forcing payday lenders out of business in Arizona, it is helping improve the financial stability of state citizens. A recent study by UC-Davis, however, found that short-term credit is simply too expensive and risky for banks and credit unions to offer. Short-term credit markets often provide businesses the money to pay their bills, make payroll and generally operate on a day-to-day basis. Similarly, the check cashing, short term credit, and other financial services that many payday lenders offer are very useful for many individuals, including those who cannot or choose not to have bank accounts.


Arizona Attorney General’s Office
Associated Press

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