Arizona Attorney General Terry Goddard last week warned payday loan stores not to try to keep operating as usual after a law authorizing their high-interest loans expires at the end of June.
The state law allowing payday lenders to operate for 10 years expires at the end of this month. The lending industry tried but failed to persuade voters and the state legislature to extend the authorization.
Goddard says he is initiating a plan to aggressively pursue violators, according to the Associated Press. A task force, a public education campaign and a consumer hot line are all part of Goddard's efforts to enforce the changes, an effort he calls "Operation Sunset."
Payday lenders write checks for short-term loans while charging fees that amount to interest rates of more than 400% on an annual basis.
When other states have tried to restrict the payday loan business, lenders have bypassed regulations by continuing to charge high interest rates and fees on loans marketed as prepaid debit cards and sham auto-title loans, said Goddard, speaking last week in front of a payday loan center in Phoenix.
Goddard says his office will try to ensure illegal lending does not occur by looking past labels used by loan companies and examining the actual transactions. The attorney general's office also will watch for payday lenders that try to operate on the Internet.
There are about 650 payday loan stores in Arizona. Executives have said some will stay open and try make a profit from other lines of business, including auto-title loans, check cashing and prepaid debit cards.
Lee Miller, a lobbyist for the payday loan industry in the state, says there will be no more payday loans in Arizona after July 1. Some lending companies will be pulling out of Arizona, he adds, which means lost jobs and less credit available to some communities. Other companies will explore new legal options to offer credit to consumers. Some are considering legal auto-title loans or loans with an annual interest rate at 36%, the legal limit.