Arizona Banking Options Changing

The Pay Day lending stores are mostly closing up in Arizona. This coincides with the expiration of the law that allowed them to operate for the last ten years.

Starting Thursday, the state no longer will allow payday-loan operators to set interest rates as high as 460 percent annually. A 10-year-old law that allowed them to charge above the 36 percent annual rate cap imposed on other lenders, such as banks, will expire.

That doesn't mean that the demand for their services will go away with them. It will merely shift to other "products."

Miller said that to stay in business, many payday lenders likely will offer auto-title loans, which can generate annual returns of up to 204 percent, according to state law. The Center for Responsible Lending said more than 200 payday stores in Arizona have received auto-title loan licenses in the past two years...

Another alternative for potential borrowers are pawn shops.

As the Wednesday expiration approaches of a law allowing payday-loan lenders to charge Arizonans up to 460 percent annual interest, Valley pawn-shop owners say they expect to see a little more business coming their way.

Pawn-shop owners had seen a marked decrease in business since the advent of the payday-loan industry. Pawn shops provide collateral loans, money in exchange for personal property that can be reclaimed after paying the loan with interest.

They offer 60-day loans at 16 percent interest with an additional 30 days prorated at 0.2 percent interest per day, about 88 percent annual interest on loans up to 90 days.

In any case, one set of alternatives has now gone away.