Predatory lenders working to protect profits by freezing Arizona's minimum wage?

Attention Arizona: You have before you a bold — really bold (think brazen) — opportunity.

The chance to sign a petition that “unleashes the ingenuity of the American spirit to strive to grow and prosper”.

The chance to “safeguard fundamental freedom” and remain free from “the whims of politicians and government bureaucrats beholden to special interests.”

In other words, the chance to stick it to a sizable number of your fellow citizens by ensuring that they remain in the poorhouse.

This, by signing a petition to put the Arizona Economic Freedom Act on the ballot next year.

I’m certain the backers of this, um, piece of work will tell you they are just doing God’s work.

After all, Jesus said “the poor will always be with you.” The payday/auto-title loan industry is simply trying to make sure that remains true.

Predators, after all, need prey.

What? 204% interest isn't enough?

The Economic Freedom Act, should voters be dumb enough to pass it, would allow lenders in Arizona to charge whatever they want to loan you money. It's aimed at eliminating the ability of government to cap auto-title loans at their present and oh-so reasonable interest rate of 204%.

Because 204% apparently isn’t enough for these bloodsuckers.

Dan Dayen, executive editor of The American Prospect, points out another provision tucked into the proposal – one that opponents fear would cancel future voter-approved boosts to the state’s minimum wage.

According to the initiative, the government “shall not prescribe, require, direct, reduce, cap, increase, limit, maintain or otherwise regulate a price for any private transaction in this state.” But it exempts “laws or regulations prescribing a minimum wage for employees, in effect as of December 31, 2019.”

Opponents suspect that means the minimum wage scheduled to go from $11 to $12 an hour on Jan. 1, 2020 won't happen, should the Economic Freedom Act become law. Nor, they fear, would the future voter mandate to index the minimum wage to inflation.  

However, Sean Noble, chairman of Arizonans for Financial Freedom, assures me that's not the intent. The voter-approved minimum wage increase scheduled to take place on Jan. 1 wouldn't be affected, he reasons, because that law already is on the books.

"The intent was to keep current statutes in place," he said.

Strange, then that the proposal specifies minimum wage laws "in effect as of December 31, 2019" -- one day before the $1 boost is scheduled to take effect. Why not say laws in effect as of Jan. 1, 2020? Or laws put in place in 2016 when voters approved to phase in a series of minimum wage increases?

If this thing passes, it'll likely land in court.  But one thing is clear. Never again could voters boost the minimum wage if the Arizona Economic Freedom Act becomes law.

A minimum wage that rises is bad for business, after all, if you happen to be in the business of ensnaring people in an endless cycle of short-term high-interest loans.

Can you guess who's pushing this bad idea?

And so it should come as no surprise that the main sponsor of the Arizona Economic Freedom Act is the National Credit Alliance…

… which is affiliated with Financial Service Centers of America …

… which is the main trade group for the payday loan/auto-title loan industry.

An industry that wants to ensure its own economic freedom to trap poor people in high-interest loans they can never pay off.

That’s where you come in.

The group needs 356,467 voter signatures by July 2 to qualify for the November 2020 ballot. The proposal would enshrine these so-called “economic freedom” protections into the state constitution.

And, just coincidentally, it would block voters from cutting that 204% interest rate.

Enter the Arizona Fair Lending Act. A coalition of community groups is hoping to ask voters next year to cap auto-title loans at the same rate as every other consumer loan: 36%.

If both initiatives pass, however, the Arizona Economic Act would take precedence because it’s a constitutional change.

Here's the problem with car-title loans

Car-title lenders, who allow people to borrow against the equity in their vehicles, popped up in Arizona after voters in 2008 threw payday loan lenders out of the state.

One in three people who take out these two- and three-week loans end up extending them, according to an analysis by the Center for Responsible Lending. One in five have their vehicle repossessed when they can no longer continue paying and paying and paying on loans that have an annual percentage rate (APR) of up to 204%.

In all, Arizona car-title borrowers pay nearly $255 million a year in interest payments, CRL reports. That's a business worth protecting.

Among the groups pushing to cap car-title loans at 36%: the Military Officers Association, the Teamsters, Living United for Change in Arizona (LUCHA), the St. Vincent de Paul Society of Tucson, the Center for Responsible Lending, the Southwest Fair Housing Council and the NAACP.

Noble, long the front man for the Koch brothers’ dark money web, says the initiative is intended to "plant the flag for free markets" and protect Arizonans from socialism.

"We've had cycle after cycle of seeing bad ideas being imported from California," he told me. "There is group of us that felt like this is a way to try to stop that and I do believe this election cycle is the best opp when will have such a clear debate over socialism and free markets."

The proposal will be funded by Noble’s dark-money group, American Encore, among others. Also, the Arizona Free Enterprise Club, a group best known for fronting Arizona Public Service’s 2014 dark money campaign to stack the Corporation Commission with friendly regulators.

The Free Enterprise Club has long pushed for these high-interest loans, saying it's all about giving people who couldn’t otherwise qualify for credit an option to get short-term cash in time times of trouble.

Really, it’s about ensuring that loan sharks can continue legally feeding off the poor.

Dayen, of The American Prospect, pointed out that one high-interest, short-term loan company, Elevate, was honest about the threats to the business in its 2018 annual report to the Securities and Exchange Commission.

“For instance,” the company wrote, “an increase in state or federal minimum-wage requirements … could decrease demand for non-prime loans.”

Thus comes the Arizona Economic Freedom Act, to ensure that never happens.

Ensure that for all time that loan sharks can legally charge desperate people … well, whatever they want.

Reach Roberts at laurie.roberts@arizonarepublic.com.