In the state of Arizona, payday lending is prohibited.
Traditional payday loans became extinct in Arizona in July 2010, when the law that had permitted payday lender operation in the state, expired. Now, all the lenders wishing to operate in the state should adhere to 36% APR small loan cap.
Arizona Payday Lending Statutes
According to Ariz. Rev. Stat. 6-632., there is a ban on payday lenders restricting businesses operation in the territory of the state unless they comply with the 36% usury cap.
Rates, Fees and Other Charges in Arizona
“A licensee may contract for and receive finance charges on consumer loans that are not more than the following amounts:
- On a consumer loan in an original principal amount of three thousand dollars or less (<$3,000), a consumer loan rate of thirty-six percent (36%).
- On a consumer loan in an original principal amount of more than three thousand dollars (>$3,000), either:
- A consumer loan rate of thirty-six
percent(36%) on the initial three thousand dollars of the original principal amount, and a consumer loan rate of twenty-four percent(24%) on that part of the principal amount greater than three thousand dollars.
- The single blended consumer loan rate that results from the total amount of finance …” ( Rev. Stat. 6-632.)
More information about payday loan laws and regulations in Arizona can be found on the official website of the Arizona Department of Financial Institutions (AZDFI).
In case of any fraudulent actions on the part of a payday lender customers can file a complaint by sending a complaint form to the department “if you suspect that you have been a victim of a financial institution or enterprise that does not have a license to conduct business in Arizona.“
Regulator: Complaints & Information
Arizona Department of Financial Institutions
The History of Payday Loans in Arizona
- Before 2010 – Payday lending was legal in Arizona. Loans could be taken for 5 days and more with the maximum loan amount of $500 and 459% APR on a 14-day $100 loan.
- 2008 – Arizona Proposition 200, also known as the Payday Loan Reform Act was defeated. The proposition was backed by the payday lenders of the state and was aimed to return payday lending practices back into Arizona. However, there weren’t enough signatures in its support. Its defeat allowed payday lending to stay effectively prohibited.
- 2010 – After the expiration of the law exempting payday lenders from 36% APR cap they could either comply or leave. Thanks to a 2008 ballot initiative and the expiration of the law a great number of payday loan companies seized their operations in Arizona. Much of them also left in the result of the Operation Sunset, initiated by State Attorney General, that aggressively pursued violating lenders.
- 2010s – Despite the 36% cap, two of Arizona’s national banks (Wells Fargo and US Bank) offered advances to the customers with direct deposits with ~365% APR. CheckSmart was punished for selling gift cards with a credit option of 360% APR.
- 2017 – There was an attempt to revive payday loans by opening up “Consumer Access Lines of Credit“, or “Flex loans”. However, the attempt was unsuccessful, the legislation didn’t pass, and loans with a 0.45% ‘daily transaction fee,” (=164% APR) didn’t return. Luckily.
[Updated As of February 2020]