But I Thought Payday Loans Were Illegal in Arizona

If you are having a rough go of it financially now, you are obviously not alone. At this time of year, many of us are realizing that we overspent on our kids’ camps, vacations and, as always, medical bills or auto repair bills always come at the worst time. It is easy to find ourselves a little short on funds just when we need to pick up back-to-school clothes for our children.

Of course, when money is tight, it is easy to make rash decisions. Once the cards are maxed out, you may think your options are limited. Flex Loan lenders in Arizona count on this.

Eight years ago, payday loans with annual interest rates in excess of 36 percent became illegal in Arizona. This has forced the former payday lenders to find a substitute and they have succeeded and then some. Once payday loans were voted out Arizona, payday loan lobbyists managed to get a bill passed in 2015, permitting “flex loans,” that substantively brought payday lending back for good.

In some respects, flex loans are even worse for consumers than payday loans. In contrast to payday loans, flex loans act as an open line of credit so they don’t need to be affirmatively renewed and borrowers can stay in debt so long as they can continue making their minimum payments. This leads Arizona consumers into a vortex of debt that may be more difficult to pull out of than a payday loan.

How bad are these loans? if a Phoenix-area consumer takes out a $1000 flex loan and makes $50 monthly payments, it would take over three years to pay off the loan, and the accumulated interest and fees would end up being more than $3800. Yikes!

Consumers should know that while payday loans have been illegal in Arizona for years, that doesn’t mean that predatory lending has gone anywhere. Unfortunately, flex loans create the same harmful cycle of debt but make it easier for consumers to get caught up in it. Arizonans with bad credit should explore all other routes for dealing with debt and make sure that they fully understand a flex loan before they sign their future away on the dotted line.

At Phoenix Fresh Start Bankruptcy Attorneys, we are always willing to review your options with you before you enter into a flex loan. Usually what we see is that there would be no need for one of these loans if a solution is found for dealing with the consumer’s debt situation. For most of our clients, eliminating all their unsecured debt also eliminates the need to take out one of these loans because they can start living on their wages again.

Please feel free to reach out to me if you would like to review your options for dealing with your debt situation. We would be more than happy to help.