Even Direct Online Payday Lenders Are 'Leaving' Arizona as New Law Takes Effect
LOS ANGELES, July 15 /PRNewswire/ -- About PayDayLoan.com - As a new law which prohibits the practice of payday lending takes effect in Arizona, many responsible and licensed payday lenders and finance groups such as Solomon Finance have already stopped access to their lending services to customers in Arizona. This new law, which limits the maximum APR allowable to a mere 36% (or $1.38 for $100 borrowed for 2 weeks), has many in the payday lending industry claiming that they will be "regulated out of business." Already, many storefronts have shut their doors permanently, leaving many to speculate on the results of restricting middle class families' already limited access to short term consumer credit.
Arizona is not the first state to enact a 36% APR cap or a flat out "ban" on payday loans, and at any given time there is usually some legislative movement under consideration against these personal short term loans. Of course much of this regulation against payday loans comes from the "bad reputation" that these lenders have somehow gathered throughout the years. Most notably of which came from a rather biased study released by the Center For Responsible Lending (CRL) that condemned payday lending as a "debt-trap" which targets their customers with expensive loans. But a 2008 staff report by the Federal Reserve Bank of New York systematically responded to nearly every claim against payday lending made by the CRL, by studying the statistics of both Georgia and North Carolina who had banned payday lending in 2004 and 2005, respectively. The report states "Most of our findings contradict the debt trap hypothesis" and that "households in Georgia bounced more checks after the ban, complained more about lenders and debt collectors, and were more likely to file for bankruptcy under Chapter 7."
The elimination of payday lending stores does not always result in the elimination of credit options, as reported from states that have already passed restrictions on payday lending. With the current accessibility of the internet, most people who are in need of a short term loan end up turning to online payday lenders. And although many responsible direct lenders such as pay1day.com will traditionally stop lending to customers in these states that have banned payday lending, there are many others who will not. Enforcement of lending through the internet across state borders is sketchy at this time, as there are not very clear rules dictating the practice of online lending or generating payday loan leads at this time. But there have been a few court cases over this "choice of law" model, so most responsible lenders will pull out of those states leaving consumers dealing with the unregulated, online "wild-west" of lenders, resulting in more complaints than when consumers still had regulated lenders to reach out to.
SOURCE PayDayLoan.com
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