It’s the last week for committees to hear bills (with the exception of Appropriations Committees), so one would think that we are nearing the end and the risk of wayward bills would be receding. However, that’s not quite the way it works around here.
In fact, this is the week when dead bills come back to life in record numbers. The form that a zombie bill takes is a “striker” or “strike-everything” amendment. Like a parasitic wasp feeding on a sickly host caterpillar, a dying but moving bill is taken over by an entirely unrelated bill in committee. This week, I will tell you the story of one of these walking dead bills that is aiming to legalize yet another type of predatory lending in Arizona.
But first, the Farley Report Pledge Break…
A few weeks ago at a community event in Tucson attended by nearly 300 people, an audience member asked whether I would be announcing a run for governor in 2018. My answer and the audience reaction was captured on video.
Click to watch and share. If you think I should run, please contribute today. I want to know if you are with me on this journey — it’s going to take all of us pulling together to move our state forward again.
—> Before we start the legislative to-dos, some good news — Gabby Giffords and Mark Kelly, who have been doing great work with their efforts to promote common-sense gun laws like closing the gun-show loophole are bringing that work home to Arizona. I had a chance to spend some time with Gabby last week, and she is doing really well. Thanks to all of you who have supported her and the other victims of the January 8 shootings — the work marches on, and together we will continue to try to make our state safe for all of us.
—> Today in Senate Appropriations, HB2496 — formerly a bill on homeowner associations from Rep. Vince Leach (R-Oro Valley) — was appropriated by a striker authored by appropriations chair Debbie Lesko (R-Peoria).
HB2496 would allow out-of-state predatory lenders to offer renewable lines of credit to borrowers with credit ratings of under 600 at annual interest rates of 164%.
Let’s drill down on this a bit. If this striker passes, an Arizona resident could borrow $2,500 from one of these companies and pay back monthly a required 2% principal reduction plus the interest on the remaining principal. At the end of twelve months, the borrower would have to make a balloon payment for the balance. In the end, he or she would have paid $6,133 for a $2,500 one-year loan.
If the money is not available to pay the balloon payment (which is likely), the borrower could roll over the remaining balance into another one-year loan to pay all that interest again. This is a long-term debt trap.
You may be thinking that we voters outlawed predatory lending like this years ago. Yes, more than 60% of Arizona voters set a cap of 36% on payday lending. But the initiative was restricted to payday lending, meaning that other forms can still be brought into existence, despite voters’ clear message that anything over 36% should be unlawful usury.
Additionally, it is illegal to offer any loan product of more than 36% to any active duty military member or their immediate family. The U.S. military decided that such loans put our soldiers at risk, so they enacted a federal law. However, veterans and their families, once they have separated from service, are not protected.
The companies proposing the current scheme have a sketchy history. One of them, Elevate, was spun off in 2014 from Think Finance (with the same CEO) which offered loans with rates as high as 365% and wrote off losses of 51% in 2014.
Another, Community Choice Financial, has been downgraded three times in two years by Moody’s rating service from B3 to Caa3 (the third lowest on the scale). Testimony brought out that their losses have been piling up from their predatory lending in other states at 60%, 90%, or 120%, so they may be trying this move into AZ at 164% in order to recoup these other losses.
There are already many options available for folks in tough financial straits like public and charitable emergency assistance programs, credit unions, and consumer lenders who lend at less than 36% interest. And help may be only as far away as their back pocket — one study showed that in Arizona, 2.5 million people with borderline or worse credit have credit cards with more than $3 billion available in unused balances that can be used for cash advances at 36% or less. None of these options pose the kind of debt spiral risk posed by a predatory lender.
During testimony, I was encouraged to hear great concern on the part of committee members for helping people in poverty. Some people just need a little money to get them through a rough patch, and these products can do that, the proponents say.
I wish I saw that concern in the form of a state budget that supports anti-poverty programs like education, childcare, basic nutrition, adult protective services, and job training — programs that really solve the problem without locking people into long-term unsustainable debt.
As I stated in my explanation of my No vote, we as a legislature should be doing everything we can to end poverty in Arizona, not serve up the poor as a new market for out-of-state predatory lenders.
The bill passed along party lines, 6-4. It now heads to the floor where I think we may have the votes to kill it, but I need your help. Please contact all the senators you can, and politely ask them to vote NO on HB2496.
—> My bill SB1144 to require regular review of the more than 331 corporate tax exemptions in the sales tax code, representing more than $12 billion in lost revenues annually, has experienced its fair share of drama lately. We could reduce the overall sales tax rate while increasing the money for education by billions.
You’ll recall it was voted out of the Senate 28-2, with strong support from the right, middle, and left. Senate Finance Chair David Farnsworth (R-Mesa) is my cosponsor, and it has the support of the extremely conservative Free Enterprise Club, which has a history of opposing special interest tax breaks that create an unlevel playing field for the free market.
Last Wednesday morning 1144 was heard in House Ways and Means. After Kevin McCarthy, leader of ATRA and well-known to Farley Report readers, signed in as Neutral, he stood up before the committee and proceeded to attack the bill viciously with no hint of neutrality. Perhaps it’s purely coincidental that one of the best-known loopholes — that allows users of four-inch pipes to avoid sales tax — was designed for one of his ATRA board members, Nevada-based Southwest Gas.
McCarthy’s attempt to justify a vote against transparency was captured well by reporter Howie Fischer and ultimately carried the day, as five Republicans on the committee voted no. One Republican, Chair Michelle Ugenti-Rita, voted with Democrats in favor, but the bill died 4-5.
The next morning, the chair called me to let me know that she still likes the bill and was willing to put the bill back on this week’s agenda for reconsideration if I could flip a vote or two.
I went to work (along with some Republican friends), and have been working ever since. I even featured the bill in my speech to the NFIB Small Business Day at the Capitol yesterday morning, to an appreciative audience. It is on the agenda for tomorrow morning and I am optimistic that I can bring my own bill back to life during Zombie Week at the Legislature. Committee starts at 10am tomorrow. You can join the fun if you watch live on azleg.gov.
—> To end with some very good news, I have a public safety bill on Governor Ducey’s desk.
My SB 1073 – license plate covers; prohibition that bans the use of license plate covers intended to block identification of the vehicle passed 31-25 out of the House Third Read with the support of the Fraternal Order of Police and the Associated Highway Patrolmen. These covers can especially obscure plate numbers from law enforcement and witnesses to crimes in low-angle sunlight.
If you are so inclined, please contact Governor Ducey and urge him to sign SB1073.
Thanks for your continuing faith in me as your Senator.
Senator, District 9, Tucson
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