FACT CHECK

Fact Check: Goddard right; Reagan backed payday loans

Julia Shumway
The Republic | azcentral.com
Terry Goddard
  • Payday loans were legal in Arizona from 2000 to 2010
  • Legislators including Michele Reagan discussed extending them in the 2010 legislative session
  • Reagan said they didn%27t %22seem like a rip-off%22 and that they were cheaper than writing a bad check
  • Terry Goddard opposed payday loan extensions and prosecuted payday lenders who continued operating

WHO SAID IT: Terry Goddard.

PARTY: Democratic.

THE RACE: Arizona secretary of state.

THE TARGET: Michele Reagan, Republican state senator and nominee for secretary of state.

THE COMMENT: "#TBT fighting predatory payday lenders. My opponent said of predatory lending: 'It doesn't seem like a rip-off to me.' "

THE FORUM: Tweet sent on Sept. 4

WHAT WE'RE LOOKING AT: Goddard's record on payday lending and whether Republican secretary of state candidate Michele Reagan expressed support for payday lenders.

ANALYSIS: Payday loans provide borrowers with a short-term cash advance, generally less than $500. Borrowers write a check or give the lender access to their checking accounts with the agreement that the lender will cash the check after the borrower receives their next paycheck.

Interest on the loans is high, with rates averaging 400 percent, compared with credit-card interest rates of 12 to 30 percent, according to the federal Consumer Financial Protection Bureau.

Before 2000, Arizona prohibited loans with interest rates higher than 36 percent. That year, the state legalized what it called "deferred presentment transactions" — better known as payday loans — for 10 years. Despite efforts in 2008 and 2010 to extend the loans' legality, they became illegal in July 2010.

The Reagan quote cited by Goddard comes from a December 2009 article in the Arizona Capitol Times, while she was a member of the Arizona House. With the sunset approaching, the newspaper queried Republican lawmakers on their plans to extend the loans or let them expire.

"They're providing a service that people seem to enjoy," Reagan said. "It doesn't seem like a rip-off to me."

She reiterated her support for the loans in a second article in January 2010, saying the interest rates make the loans seem like a worse deal than they are.

"It costs more to bounce a check," she said. "So, if you need a bag of groceries and the two options are go to write a bad check or go to one of these places, it's actually a benefit and cheaper (to borrow from a payday lender)."

Arizona Secretary of State Michele Reagan

Under Arizona law, writing a bad check can result in both civil and criminal charges.

Then-Majority Whip Andy Tobin, who is now running against Rep. Ann Kirkpatrick in eastern Arizona's 1st Congressional District, sponsored a bill in 2010 to extend and regulate the payday-loan industry. Tobin withdrew the bill in committee, and the Legislature made no other efforts to extend the loans' legality.

When AZ Fact Check asked Reagan about her earlier comments on payday loans, she said she never had the opportunity to vote on them as a state senator because Arizona voters abolished them in 2008.

In 2007, as a member of the Arizona House, Reagan voted for Senate Bill 1446, which would have repealed the 2010 termination date for payday loans. It passed the House but was held in conference committee.

Goddard, Arizona's attorney general from 2003 to 2010, harshly criticized payday loans. He publicly opposed 2008's failed Proposition 200, a measure backed by the payday-loan industry that would have permanently extended the loans' legality and capped their interest rate at 391 percent. In 2009, he sued a national payday lender that deceptively advertised to Arizonans; Goddard's successor, Tom Horne, settled the suit in 2011.

Shortly before the payday-loan statute expired, Goddard announced Operation Sunset, a campaign to enforce the ban on payday loans. Other states that had banned such loans saw them continue, masquerading as legal business models.

Goddard sent payday lenders a letter warning that his enforcement team would ensure payday loans did not continue under a new name and promising that his response would be "swift and aggressive." Several payday lenders left Arizona.

BOTTOM LINE: As attorney general, Goddard fought against payday loans and prosecuted lenders who continued providing them after they became illegal. Reagan voiced support for the loans at least twice before they expired.

THE FINDING: Four stars: True

SOURCES:Terry Goddard tweet; "Payday Lending State Statutes," National Conference of State Legislatures; "What is a payday loan?" Consumer Financial Protection Bureau website; "Lights out on payday loans," Arizona Capitol Times Dec. 22, 2009; Reagan's vote on Senate Bill 1446; "Terry Goddard Sues Major Payday Lender for Deceptive Practices" news release, Dec. 4 2009; "Attorney General Tom Horne Announces Settlement Agreement with Quik Cash Financial Services," news release, March 8, 2011; Goddard letter to payday lenders, June 9, 2010; "Goddard opposes raising payday loan rates" The Arizona Republic, Sept. 16, 2008; Arizona Revised Statute 13-0809; e-mail from Michele Reagan.