Arizona Payday Loan Reform, Proposition 200 (2008)

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Arizona Proposition 200, also known as the Payday Loan Reform Act, was on the November ballot in Arizona as a citizen-initiated constitutional amendment. It was defeated.

The payday-loan initiative was primarily backed by the payday-loan business in the state, and was less restrictive than the Stop Payday Loans Initiative, sponsored by Rep. Marion McClure, D-30, and Sen. Debbie McCune Davis, D-14. That measure was withdrawn in early June when not enough signatures were being collected to qualify it for the ballot.[1]

Election results

Arizona Payday Loan Reform
Defeatedd No1,271,71759.6%
Yes 860,607 40.4%

Results according to the Arizona Secretary of State.[2]

Text of the initiative

The 100-word description filed with the Arizona Secretary of State's office for this initiated state statute reads:

Arizonans use payday lending services everyday to meet unforeseen expenses and financial emergencies. The payday lending industry is set to be eliminated and the Arizona Legislature refuses to enact reforms to benefit borrowers while preserving this important financial option. This measure will bring dramatic pro-consumer reform to payday lending and preserve consumer choice. It includes a substantial rate cut, eliminates rolling-over principal to extend a loan, creates a repayment plan at no cost to customers that can't meet their obligations, and inhibits a borrower's ability to obtain more than one loan at a time.[3][4]


The payday lending industry was an $85 billion industry that provides short-term loans, which were usually secured with a check postdated to the borrower's next payday. The interest rate in the absence of regulation had typically worked out to an average of $15 per $100 borrowed on a two-week loan. The high interest rates were what had led to legislative attempts to regulate the industry. The practice was already illegal in fifteen states at the time of Proposition 200. In 2008, in addition to Prop 200, Ohioans voted on payday lending in Ohio Issue 5. In Ohio and Arizona together, the number of payday-lending branches outnumbers the Starbucks and McDonald's outlets combined.[5]

Details of the proposal

Under this proposal:

  • The payday-loan industry, which faces elimination in 2010 when an enabling law expires, would have its right to practice in the state extended indefinitely.
  • Fees payday lenders are allowed to charge would drop from $17.65 to $15 on a $100, two-week loan.
  • Lenders would not be permitted to roll over the principal into extended loans and would have to offer consumers repayment plans.


"Arizonans for Financial Reform" was supporting this initiative. It was filed in response to the Stop Payday Loans Initiative, which would eliminate all payday loans.

According to the website of another affiliated support organization, "Reform Arizona Payday Loans,"[6], thousands of Arizonans use payday loans responsibly to cover unexpected day-to-day expenses. But, the site warns, the Stop Payday Loans Initiative would take away this simple financial option in Arizona. Supporters of this measure argued that eliminating payday loans entirely would hurt many families financially, through higher banking fees, credit card late fees, and utility reconnect fees.[6]

Stan Barnes, a lobbyist and consultant to Americans for Financial Reform, a committee funded by the payday-loan industry, supported this measure and said the issue comes down to consumer choice.

"Payday-lending stores exist because customers in the real world make rational decisions about borrowing money short-term, and in many instances, payday loans are the least expensive option for people that have an emergency or unforeseen expense they have to deal with," Barnes said.

Supporters added that ending all payday loans in Arizona would also eliminate more than 2,500 Arizona jobs.[6]

Supporting arguments

Main arguments put forward in support of Proposition 200 included:

  • Prop. 200 would mandate a substantial cut in loan fees
  • Establishes a flexible repayment plan
  • Requires internet lenders to be licensed in the state
  • Enacts tough new regulations to crack down on unscrupulous operators
  • "About 5 percent of Americans have taken out a payday loan. There's scant evidence that their lot would have been better if denied that opportunity. A study by two economists with the New York Federal Reserve Bank found that after Georgia and North Carolina abolished payday lending, bounced checks and Chapter 7 bankruptcies increased."[7]

Donors to Proposition 200

By the end of July, supporters of Prop. 200 had given about $8.7 million to a campaign committee organized to promote the initiative. The Arizona Republic reported that "nearly every cent...has been donated by - guess who? - a trade group representing payday lenders: the Arizona Community Financial Services Association."[8]


The website No On 200 : It's No Reform At All was established in opposition to this initiative.

Rep. Marian McClure (R-Tucson), chairwoman of the Stop Payday Loans Initiative campaign, said that payday loan reform, such as this Payday Loan Reform Act]], is nothing more than "window dressing."[9]

The Democratic Party of Arizona endorsed the Stop Payday Loans initiative and argued that payday loans are "by definition predatory and profit from financially vulnerable Arizona families by trapping them in unending cycles of debt."

Opposing arguments

Main arguments proposed in opposition to Proposition 200 included:

  • Prop. 200 fails to lengthen the minimum loan term of five days, thus keeping payday loan products at 391% APR or worse
  • Electronic access to borrower accounts gives payday lenders unfettered debit access to customer bank accounts and facilitates overcharging
  • The repayment plan provision limits consumers' right to request a repayment plan to once per year.
  • "The argument that closing payday loan stores would be a blow to the economy is equally spurious. It might help the economy if we legalized the sale of heroin and let merchants hawk it on the street, but that doesn't mean it would make our lives any better. An industry that thrives on keeping consumers poor does not help the economy."[10]


Pay day lenders did not go away so easily after the measure’s defeat, as they tried to convince lawmakers to let them stay in business during the fall of 2009. According to reports, the industry hired former state Attorney General Grant Woods to represent them in their efforts. According to Woods, after studying a proposal by the industry, he was convinced there was a place in the state of payday lenders.[11]

Path to the ballot

On June 23, its supporters turned in more than 265,000 signatures to the Arizona Secretary of State.

Ballot title lawsuit

Arizonans for Responsible Lending filed a lawsuit over the ballot language. According to the lawsuit, voters might unknowingly approve a cap of 400 percent interest rates for payday loans if the Secretary of State did not clarify the descriptive language of Proposition 200 on the November's ballot.

Superior Court Judge Sam Myers ruled Aug. 27, 2008, that Secretary of State Janice Brewer did not have to clarify the language. Judge Myers said that the description of the ballot measure drafted by Secretary Brewer was technically accurate, and that with only 50 words to explain complex issues, choices have to be made.

Additional information about ballot litigation in 2008

See also

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