Finance/Micro-Loan Programs

Tucson Council Helps Defeat Predatory Lending

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    Irene Frechette

    Spirituality, Empowerment, Mentoring, Advocacy, Inclusion, Collaboration, Social Capital

    Society of St. Vincent de Paul
    Tucson Diocesan Council
    June 2, 2016

    By Giulio Grecchi, Tucson Diocesan SVdP Council, Systemic Change
    Voice of the Poor (VOP) Vincentians were instrumental in defeating a 2016 bill proposed in the Arizona legislature that would have greatly expanded predatory lending in that state and could have cost the poor and vulnerable an extra $350 million in usurious interest.
    On Saturday, May 7 at 5:45 AM, the Arizona Legislature adjourned its 2016 session “sine die” (i.e., indefinitely). During the last few days, a flurry of activity resulted in over 200 bills being voted on, but the leadership of the Senate never brought the predatory lending bill, Senate Bill 1316, to the floor for a vote, well knowing that they did not have the support to pass it.
    VOP Vincentians Dan Torrington and Christine Krikliwy from Tucson and Kathy Jorgensen from Phoenix were at the legislature repeatedly during every step of the bill’s legislative process, witnessing Legislative Committees actions, testifying, and visiting individual legislators, all with the end result of gaining the trust and the confidence of many.

    Half way through the process, Vincentians distributed to every legislator a “Flex Loans Counterproposal”, which was quoted many times during the legislative debates. – you can see it at this link:
    Their efforts were strengthened by the numerous phone calls and e-mail messages that Vincentians and many others sent to legislators in response to seven action alerts issued since February. These messages gave credibility to the verbal statements of our VOP members during their frequent legislative visits.
    This is the second year in a row that proposed legislation authorizing the expansion of predatory lending in Arizona through “Flex Loans”, with their usurious interest rates, did not make it, sparing the poor and vulnerable of our state from further hardship.
    According to calculations by Dan Torrington, Western Region VOP Chair, this bill would have allowed predatory lending firms to extract and take out of the state an estimated $350,000,000 per year in usurious interest from Arizona’s poor and vulnerable. The bill, if passed, would have left the Society of St Vincent de Paul, other charities and the State of Arizona taxpayers to deal with the financial and emotional damage done to the poor.
    To estimate the $350,000,000 in interest, Dan assumed that each of the current 600 predatory Car Title Loans stores in Arizona would also start offering Flex Loans. He further assumed that each store would make 500 loans per year (10 a week) with an average loan amount of $1,000 and an average maturity of 12 months at the allowed interest rate of 15% per month (180% a year).
    The predatory lending industry, which has a strong influence on several key legislators, tried every possible trick to get the bill to pass, including:
    1. Re-election Campaign Contributions and promises of even larger future contributions were well documented by the press. As an example see:
    2. Paying for favorable coverage in the media.
    3. Using a parliamentary maneuver (Striker Bill) to revive the proposed legislation after it failed to pass a committee vote in the Senate. Industry friendly legislators re-introduced the same bill at the House, past the deadline, by changing the text of another bill of an entirely different subject, already in the pipeline (Striker).
    4. Tacking on non-substantive amendments to the bill, trying to sway legislators to vote in its favor.
    5. Maintaining a large number of well-funded lobbyists pushing the bill with deceptive arguments at the legislature.
    6. Publically castigating members of the majority, who did not follow the party guidelines and voted against the bill, by sending demeaning messages directly to their constituents and through the media, in general.
    We were only able to overcome all of these obstacles because of a strong sustained effort by many.
    We collaborated and shared information with over fifty like-minded organizations also opposing Flex Loans. The coalition includes the Center for Responsible Lending, South West Center for Economic Integrity, the Veterans, AARP, Salvation Army, Children Action Alliance, Arizona Interfaith, just to name a few.
    Results such as this can only happen when many people join forces, get involved and pull in the same direction.
    We have been able to stop Flex Loans in 2015 and 2016, but we expect the industry to try again next year, unless we can encourage the implementation of alternative forms of small loans, at affordable rates and robust enough to discourage the industry from bringing new predatory financial instruments to Arizona.
    There are alternatives to predatory lending, such as “The FDIC Small-Dollar Loan Pilot Program” and small loans offered by credit unions. The coalition plans to continue to work together to review existing alternatives and figure out which one is realistically implementable.

    Today, June 2, 2016, the Federal Government (CFPB) has issued its rules to reign in predatory high cost small loans. Comments on the rules are due by Sept 14th. We will ask the Federal Government to make the rules as strict as possible to limit access of predatory lenders to vulnerable Arizonans, trapping them into debt, harassing them with debt collections, wrecking their checking accounts and repossessing their cars, their only means of getting to work.

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