Support modern installment lending laws in Arizona
In Arizona, consumer loans above $10,000 are unregulated, meaning there is no cap on the Annual Percentage Rate (APR) that lenders can charge qualifying borrowers.
At the same time, the permitted APR for loans between $3,000 and $10,000 is too low, unnecessarily restricting access to much needed credit for working Arizonans, many of whom struggle financially without safe, affordable credit.
The solution to these problems of unregulated lending and unnecessary restrictions lies in a modernized version of the tiered APR system; a solution that would provide vital oversight on loans that lack it, while enabling wider access to credit for Arizonans.
A solution like this would modernize state lending laws, bringing them in line with 29 other states with similar systems, allowing more Arizonans to access safe, affordable credit while actually increasing state oversight over non-bank lending in Arizona.
New oversight and greater access to safe, affordable credit
New oversight and greater access to safe, affordable credit in Arizona
Leaders in our state have the opportunity to modernize state laws by adopting a tiered system which would, for the first-time, regulate loans above $10,000. The current 36% APR rate for loans under $3,000 would be extended to all loans under $10,000, significantly increasing the number of Arizonans who would qualify at this level. It would also extend the 24% interest cap from $10,001.00 to loans up to $50,000. Currently, loans above $10,000 have no interest rate cap.
This system would significantly increase state control over larger loans while enabling more individuals and families to consolidate their credit, meet financial emergencies, and build the credit histories that are essential to financial capability and mobility. Rate modernization will also allow responsible lenders to make a bigger contribution to local and state economies, employing more Arizonans and solidifying Arizona’s reputation as a business-friendly state.
Modernization will strengthen Arizona’s reputation as a consumer-focused, yet business-friendly state
The appetite for consumer credit has not been suppressed by current interest rates – it just means that consumers are turning to out-of-state or online lenders, who do not pay Arizona taxes and do not employ Arizonans. Meanwhile, current regulations prevent responsible, branch-based lenders from entering into business or expanding in the state.
Modernizing lending laws will encourage Arizona-based lenders to hire more state residents, continue to make an impact in local communities and on the state economy and expand operations in the state, while inviting new lenders to come to Arizona. This increases healthy competition and gives consumers even more options.
The unregulated, uncapped online lending industry is booming
The unregulated, uncapped online lending industry is booming
Under current regulations, community-based installment lenders cannot serve thousands of borrowers due to the restrictive rate structure. Those borrowers, who have very real and tangible credit needs, frequently turn to online and unregulated lenders. In most cases, those lenders are not tailoring their business to comply with individual state laws and often lend at higher rates to customers.
There are reasonable, safe, affordable options
Arizonans in need of credit can turn to responsible lenders who have a demonstrated history of doing business in the state. These lenders already adhere to Arizona laws and regulations, and some even self-regulate their rates in states that have no rate caps. These lenders are committed to doing the right thing and serving as many customers as they can in a safe, responsible manner. With stringent ability-to-repay underwriting, customers can find real solutions that lead to financial successes.
The bottom line
With modernization, the availability of safe and affordable credit in Arizona will increase significantly, allowing Arizonans who face financial difficulties to access credit – and be able to pay it back without ending up in a worse financial situation than before they took the loan.
