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Some laws do good, some laws do harm, and some laws pretend to do something while actually doing nothing. The Arizona law seems to fall into the last category. It’s an election year; the bill allows the legislators to pose and preen and pretend that they have done something important for the public. Have they?
Not really. The only significant provision of the bill is that it prohibits military personnel from “rolling over” a payday loan. Rolling over is the term used when a borrower cannot repay the loan, so he or she renews it for another two weeks by paying the interest a second time. Some states allow this to be done up to six times; this is what often gets borrowers into trouble. Under the new law, rollovers would be prohibited for military personnel or their spouses. While payday loan stores are often located near military bases, soldiers are hardly the industry’s only customers.
The law doesn’t affect rollovers for anyone else. The law doesn’t prevent members of the military from obtaining a second loan to pay off the first one. That is technically illegal, but unlike some other states, Arizona has no database to keep track of who has loans at any given time. That being the case, the law does nothing to prevent taking out a second loan to pay off the first one.
And that is pretty much all the bill does. The cash advance industry is said to be happy with the bill; that speaks volumes. As a rule the industry, which is wildly profitable, opposes any attempts at reform. Some states have lowered the maximum interest rate to 36% per year, but the industry claims that rates that low aren’t profitable. So if a bill gets passed and the industry targeted by the bill is happy with it, you can rest assured that the bill isn’t good for consumers. And this one doesn’t do much to help consumers at all.
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