PHOENIX — Backers of a new initiative seek to outlaw title loans — or at least the interest rates they are allowed to charge.
Legal papers filed late Wednesday ask voters to remove the exemption the industry now has from state laws, which limit allowable interest to no more than 36 percent a year. Current title loans can carry an annual percentage rate up to 204 percent a year.
Backers need 237,645 valid signatures by July 2, 2020 to put the issue on the general election ballot that year.
The move is being pushed by many of the same organizations that were successful nearly a decade ago in wiping out so-called “payday loans,” where people could borrow up to $500 for two-week periods — at effective interest rates that could exceed 400 percent.
However, people who own vehicles were left with the option of borrowing against them.
The industry has stretched the law to the point where people don’t even need to have clear title to their vehicles to borrow against them, said Kelly Griffith, of the Southwest Center for Economic Integrity, one of the groups behind the initiative.
“They’re exploiting that loophole,” lending money to those who cannot afford to repay and therefore have to keep taking out new loans, she said. “It’s another name for payday loans.”
In 2008, voters decided to kill off the payday loan industry, despite lenders spending more than $17 million on the campaign to keep it alive.
Since that time the Consumer Federation of America and the Center for Economic Integrity released a report showing that the title lending industry has exploded in Arizona.
There have been several legislative proposals to rein in the industry and cap the allowable interest at 36 percent.