ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR S.B. 1006
deferred presentment; military service members
Purpose
Establishes requirements for deferred presentment loans to members of the United States military or their spouses.
Background
Deferred presentment, also known as payday lending, is a service that offers short-term loans based on a personal check held for future deposit. Typically, a person will write a check dated in the future, for the loan amount and finance charge. At the end of the loan period, the person redeems the check with cash or the creditor deposits the check for the face amount. If the person cannot afford to pay the check, the person may roll over or renew the loan, by paying an additional fee.
Statute requires a check accepted by a payday lending establishment to be at least $50 and not more than $500, excluding permitted fees. A person may not renew the loan more than three consecutive times. The licensee and customer are required to sign an agreement specifying the terms of the loan and a separate, new written agreement is required for each loan extension. The licensee may use all available civil remedies to collect on a check, including the imposition of the dishonored check fee, which is $25.00 plus any actual charges assessed.
The Community Financial Services Association of America (CFSA) is a national membership trade association for the deferred presentment industry. CFSA has published “Military Best Practices” for its members. The best practices include: 1) a prohibition on the garnishment of military wages or salaries; 2) deferral of collection activity against a military customer who has been deployed to a combat or combat support posting for the duration of the deployment or a Reserve or National Guard member unexpectedly called to active duty; 3) a prohibition against contacting the military chain of command of a military customer in an effort to collect on the loan; and 4) a requirement that CFSA members honor the terms of any repayment agreement that they have entered into with any customer, including any repayment agreement negotiated through military counselors or third-party credit counselors.
According to CFSA, Texas, Virginia, Illinois, Kansas, Nevada, Washington and Georgia have adopted laws similar to the best practices.
There is no anticipated fiscal impact to the state General Fund associated with this measure.
Provisions
1. Prohibits a deferred presentment licensee (licensee) from garnishing any military wages or salary if lending to a member of the military service of the United States (member) or the member’s spouse.
2. Prohibits collection activity by a licensee against a member or the member’s spouse during a member’s deployment to a combat or combat support posting or during active duty service by a member of the National Guard or any military reserve unit of a branch of the Armed Forces of the United States.
3. Prohibits a licensee from contacting the member’s employer about a deferred presentment debt of the member or the member’s spouse.
4. Prohibits deferred presentment transactions from taking place in locations that the member’s commanding officer disallows.
5. Binds a licensee to the terms of any repayment agreement that the licensee negotiates through military counselors or third party credit counselors.
6. Requires a licensee, before engaging in a deferred presentment transaction, to provide a written statement to a member of the military or the member’s spouse, stating the prohibited practices.
7. Makes a technical change.
8. Becomes effective on the general effective date.
Prepared by Senate Research
January 13, 2006
BP/HG/jas