The payday loan industry is keeping mum after the defeat of its ballot initiative to permanently protect its right to operate in Arizona.
Voters rejected Proposition 200, which was backed by one of the most expensive campaigns in state history. Stan Barnes, who managed the campaign, had nothing to say Wednesday about the loss and what's next for the industry.
"We're still absorbing the loss and will plan for the future on another date," he said.
Enrico Torres, regional director of the payday lender Checkmate and an industry spokesman, didn't return calls for comment.
State law caps allowable interest rates at 36 percent a year, but in 2000 state lawmakers created a special exemption for payday lenders. That exemption expires July 1, 2010, and lenders went to the ballot after lawmakers refused to extend that.
As of July 1, 2010, payday lenders will have to abide by that 36 percent interest limit, as opposed to more than 450 percent that the current fees compute to and more than the 391 percent cap offered in the initiative.
State Sen. Debbie McCune Davis, D-Phoenix, is chairwoman of Arizonans for Responsible Lending, which opposed Proposition 200.
"We have had a consumer loan act in the state for many years ... and I think it's time to return to the reinstatement of that law" for payday lenders, she said. "The consumer loan act works, and lending under that model is what is in Arizona consumers' best interest."
In Ohio, voters approved an initiative that places a 28 percent cap on interest rates charged by payday lenders, McCune Davis said.
"This is the trend across the country, to say payday lenders are not an asset to the community and that we want to go back to the time when there was a usury law in effect, and they can adapt their model ... as long as it conforms to that," she said.
Usury laws are state laws that specify the maximum legal interest rate.
"The best example is North Carolina, where the payday lenders were put under a cap in 2005, and two things happened," McCune Davis said. "They had a return of community-based lenders and they have had their credit unions begin to work with their customers in ways to help them solve short-term financial problems."
It's likely the payday loan industry will once again try to persuade state lawmakers to extend the exemption past July 1, 2010, but it's unlikely any attempt would be successful, she said.
"If the Legislature doesn't see that the public doesn't support payday lenders, then it would seem that voting to protect them would be at their peril," McCune Davis said.