State

Future of payday loans lies with lawmakers

Monday, November 10, 2008 11:05 PM CST

PHOENIX (AP) - Arizona voters may have buried the payday loan industry, but backers are hoping the state Legislature can dig them out.

Voters overwhelmingly rejected Proposition 200, a ballot initiative paid for and written by the loan companies to allow them to continue charging high interest rates on small loans along with extending their right to do business indefinitely instead of expiring on July 1, 2010.

A payday loan is a short-term cash advance given to a borrower who promises to repay the loan plus a fee after the next payday.

A borrower needs only a checking account and a steady job in order to get loans up to $500 instantly.

Payday-loan supporters say they are needed for people who face an immediate cash crunch.

Critics say payday lenders get users into debt traps because many borrowers can't repay the loan in a few weeks, causing them to extend the loan with additional fees.