In 2010, Arizona's residents voted to pass legislation requiring payday loan lenders to cease conducting business within the state if they did not comply with the state's new interest limit regulations. In an aggressive effort to combat predatory lending practices, the Arizona Office of the Attorney General has the legal authority to investigate complaints against unauthorized payday loan lenders and can cancel debts created after the date the state passed the new legislation.
Implications on Existing Loans
Since the enactment of the new Arizona law prohibiting payday lenders from extending payday loans to consumers, payday loan lenders can no longer provide new payday loans to consumers. However, payday loans taken out before June 30, 2010, are still legally valid, and creditors have legal collection rights to demand repayment against consumers. If a consumer borrowed money from a payday loan lender before June 30, 2010, the lender can still require him to repay his balance at the previous interest rate.
Internet Lenders
According to the Arizona Attorney General's Office, Internet or online payday loan companies are generally subject to both federal and state laws. If an online payday loan lender extends loans to Arizona residents, it is subject to the 2010 prohibition on payday loan practices. Thus, most online payday loan lenders may not be able to collect their loans from Arizona residents. However, although the prohibition may not stop their attempts to collect their debts, federal and state consumer protection laws give borrowers legal rights to end harassing phone calls and collection attempts.
Legal Consequences
Arizona law prohibits payday loan lenders from conducting business within the state. Since payday loan lenders are not legally permitted to make payday loans, they will not have judicial "standing" to sue nonpaying borrowers in Arizona. The Arizona Attorney General's Office aggressively pursues illegal payday lenders through its "Operation Sunset" task force. Consumers can report violations to the Attorney General's Office against illegally operating payday lenders. Consumers can also file complaints with the Federal Trade Commission, the Arizona Department of Financial Institutions or the Attorney General's Office against lenders and collection agencies violating the Fair Debt Collection Law.
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