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Despite Death Of Payday Lending, State Lawmakers Push For New High-Interest Loan

Eight years after Arizonans voted to kill payday lending, the state House Ways and Means Committee has voted to allow a new kind of high-interest loan.

In general state law limits interest to no more than 36 percent a year. This measure permits lenders to charge up to 17 percent a month on loans up to $2,500 for up to two years.

Rep. John Kavanagh, R-Fountain Hills, said the loans are needed by some people who have no credit history and limited income when emergency expenses pop up;  think: a broken air conditioner, an unexpected prescription or even a Christmas present for a spouse.

But Dan Torrington of the St. Vincent de Paul Society of Tucson said the numbers cannot be ignored.

"If I borrowed at $2,500 which was going to solve all my problems, and I took the full 24-month period to repay it, which I would because that would minimize my payments, I would repay $10,400 for $2,500. There's no way that you can say that this is not a debt trap," he said.

There's also the fact that in 2008 voters killed payday loans in Arizona, another form of high-interest borrowing. But Rep. J.D. Mesnard, R-Gilbert, said those had annual interest rates north of 400 percent, while this new proposal contains interest rates of only 204 percent.

Anyway, Mesnard said, this is about consumer choice. "When we prohibit people from making decisions that's exactly what we're saying, that we know better than they do. I resist that. Does it mean that, given a choice, that people will make bad decisions sometimes? Yes, it does. But you don't remove the choice from everybody because of those who will make bad decisions."