The payday loan industry serves a specific market. People with bad credit need a place to borrow money to cover emergencies. In order to provide this service, high interest rates are needed to cover the defaults (remember, these are people with bad credit). Remember, high interest rates do two things. The first is deter people from borrowing unless their emergency justifies the cost. Second, high interest rates get other entrepreneurs into the market, increasing competition, driving down rates. If we prevent this market from existing, we will only be hurting the poor.
Some may say, but people are abusing the system. So! Let them. And when they default on the loans, let the pay day loan industry either absorb the cost of the defaults, or better discriminate between good loans and bad. You will see a diversification of the market. Some will have higher standards for borrowers with lower rates. Others will have higher rates for borrowers with worse credit.
The law’s intent is to protect the poor from high interest rates. Instead it will prevent the poor from making decisions that impact their families, like replacing the air conditioner in July.
To send a message to AZ legislators, see this AZcentral blog post: