Federal rules on high interest payday loans are set to tighten up since Congress allowed a deadline to pass without changing the regulations.
The new rules will require short-term lenders to determine if the borrower can afford a loan, and limit the number of loans a person could take out.
Payday lending isn’t legal in Arizona, but Zaida Dedolph, director of public policy for the Arizona Community Action Association, says the federal rules could help set the tone for other lenders.
However, there are still red flags borrowers should watch for.
“We’re happy to see that this particular rule will go into effect, but that victory really comes after a number of attempts at both the state and federal level to undermine our financial regulations,” she points out.
Dedolph says the Arizona State Legislature made some changes this year that could allow for more risky financial practices.
“Everyone needs to be aware of these issues, because even if you’re not taking out a title loan, you still are going to be impacted by the lending industry.”
For example, a new law known as a Regulatory Sandbox Program will let some businesses test new financial services or products with no license and little oversight for up to two years in the state.
Another bill Gov. Doug Ducey recently signed into law repeals state inspection requirements for banks and financial institutions, including those that offer high interest auto title loans.
Dedolph predicts that will make it harder to catch banks and lenders in Arizona that aren’t playing by the rules.
“Everyone needs to be aware of these issues, because even if you’re not taking out a title loan, you still are going to be impacted by the lending industry,” she stresses. “We saw the financial collapse – all of us were impacted by that in one way or another, even though not all of us had mortgages.”
Dedolph cautions anyone in Arizona to always double check interest rates and fees before borrowing money.
The Center for Responsible Lending estimates Arizonans pay nearly $255 million each year just on fees for high interest title loans on their vehicles.
by Katherine Davis-Young
Public News Service – AZ