Arizona: Payday Lenders Skirted State Law by Changing to Title Loans — Often Without Requiring a Title


After Arizona Instituted A Payday Loan Law, Over 200 Payday Businesses In The State Converted To Title Loans Which Can Charge Up To 204% APR.

“Beginning in 2008, when the clock started winding down on payday lending in Arizona, Griffith’s Tucson-based group, the Center for Economic Integrity, watched as more than 200 payday loan businesses obtained licenses as auto title lenders. Some of the same storefronts that had advertised “Payday Loans” now have prominent signs for “Car Title Loans.” Arizona laws allow up to a 204 percent annual interest rate if a vehicle is involved as security.” [AARP Bulletin, 12/1/10]

Not All Payday Lenders Who Gave Title Loans In Arizona Even Required The Borrower To Surrender The Title; Some Loans Were Given Even If The Borrower Had A Bank Loan On The Car. “In traditional auto title loans, which have been around for decades, the lender assumes title of a car for the life of the loan. But some auto loans offered by former payday lenders don’t require the borrower to surrender the title as collateral. Even if someone has a bank loan on a car, they may still be able to get a car title loan. State Sen. Debbie McCune Davis, D-Phoenix, who led the legislative effort to kill payday loans, said she believes that if lenders aren’t actually holding a title, it’s a signature loan and they should only be allowed to charge up to 36 percent a year. “We are in new territory,” McCune Davis said. “We have asked the Attorney General’s Office to take a look at this practice, and we are waiting for some guidance as to where these loans fall. Are they really auto title loans?” [AARP Bulletin, 12/1/10]

NY Times: When Arizona Effectively Outlawed Payday Loans, ACE Cash Express Registered As A Title Lender There. “Seeing the regulatory landscape shift, some of the country’s largest payday lenders are switching gears. When Arizona effectively outlawed payday loans, ACE Cash Express registered its payday loan storefronts in the state as car title lenders, state records show.” [New York Times, 12/25/14]

The Number Of Title Lending Licenses Given Out By Arizona More Than Doubled In The Four Years After The Payday Lending Law Went Into Effect Than The Eight Years Prior.  “But the sunset of payday lending only fueled a surge in another form of quick cash for the financially vulnerable: auto-title lending. Like their payday-lending counterparts, auto-title lenders, which use borrowers’ vehicles as collateral, offer short-term loans at triple-digit interest rates, potentially reaching 204 percent. More than 430 auto-title-lending branches have been licensed in Arizona since 2009, the year after voters rejected payday lending, state figures show. By comparison, from 2000 to 2008, about 160 title-lending branches were licensed with the state. The rise of title lenders has rekindled a debate over whether these kinds of high-interest loans ultimately help or take advantage of low-income borrowers. [Arizona Republic, 3/31/13]

Act Now