Blog For Arizona

Attorney General files suit against Payday Lender

by David Safier

Assistant Attorney General Vince Rabago filed suit against payday lender Quik Cash Friday. The company is one of the largest publicly traded payday lenders in the country. If anyone harbors illusions about payday lenders acting in a consumer-friendly way, this suit should put those fantasies to rest.

When Quik Cash went after customers from all over the state who couldn't repay their loans, it often sued them in the Pima County Justice Court. There are two big problems with that.

First, from an ethical standpoint, when you sue people hundreds of miles from where they live (some even lived in Nevada and got their loans in Bullhead City, AZ), that makes it almost impossible for them to attend the court date and defend themselves. According to Rabago, there were over 100 default judgments for Quik Cash in 2008 alone, many simply because the people being sued had no way to get to court.

The second problem is -- and this is the one the A.G. is going after -- it's illegal. Quik Cash promised to abide by Arizona law, which requires that lawsuits under $10,000 be filed near where the defendant lives or where the loan was granted. (The term for this violation is "distant forum abuse.")

Arizona has about 38 Quik Cash stores and accounts for about 8% of the company's revenues. The suit could add up to $5 million dollars in penalties for Quik Cash, which doesn't seem to me to be nearly enough to pay for their outrageous, deceptive practices. It would also wipe out the judgments against hundreds of people Quik Cash took to court and shut down its businesses in the state.

Rabago filed a temporary restraining order against Quik Cash to stop it from suing any more defendants far away from their homes until the suit is decided. According to Rabago, a company will often do what it can to stall an order like that from taking effect, but when it saw the witnesses Rabago had, it went along with the restraining order without much of a fuss. The company was trying to fight the restraining order, according to Rabago, but he convinced the company to back down. [Note: I originally reported the events incorrectly and have corrected it. I regret the error.]

Rabago related two interesting side stories to me. One was, in Wisconsin, the company was found to have engaged in "outrageous conduct" when it cashed the check of a debtor when he was in bankruptcy. You can't do that.

The other was, the President of the company was the head of the payday lenders' trade association during 2008 when the "distant forum abuse" problems were happening in Arizona. He was the smiling face of the industry, assuring people that payday loans are a fair and reasonable way for individuals and families to get small loans to carry them through hard times.

By me, we can't get rid of these scoundrels soon enough. Unless the Republicans figure out a way to block the sunset law that is scheduled to shut the state's payday lenders down, we should be rid of all of them sometime in 2010. Meanwhile, if the suit chases one payday lender out early and gets some money back into the hands of people it ripped off, that's icing on the cake.

UPDATE: Howard Fischer has written an article with more details.

Populism Consuming Representative Democracy

By Michael Bryan

Tucson's ballot initiative to peg the ratio of emergency personnel to population seems to me to be the latest iteration of populist discontent being cynically used to snatch at political power while denigrating and disempowering representative democracy.

Too frequently over the past few decades we have seen progressive institutions such as the ballot initiative used to tie the hands of representative government. There are many examples of extremely unwise, but politically facile policy created using populist sentiments: the Prop 13 property tax freeze in California and the disastrous Taxpayer's Bill of Rights arbitrarily limiting the growth of government expenditures in Colorado being chief among them.

In each case, what seems like an easy fix for the difficult and messy business of governance is sold as patent medicine for what ails the body politic. Only later does it become apparent the snake oil contains toxic waste.

There are no easy answers or simple formulas for good governance. Wise policy requires democratic debate and tough deliberation over alternatives, not simplistic slogans and expedient but static 'fixes'.

Every time that the populists tout their latest gee-wiz gew-gaw, they chip away at the power and accountability of representative democracy. By taking the power to make policy and actually govern out of the hands of our elected representatives, we only assure that the accountability and esteem of our elected representatives will further decline.

This latest iteration of this populist disease is the Public Safety First! initiative. By arbitrarily requiring a particular ratio of emergency personnel to population, the representative system by which public preferences for such matters ought to be expressed is bypassed. The fact that all the Republican challengers support this attempt to remove public safety decisions from the very democratically elected body they are seeking to become members of should tell you something about their opinion of the institution, and their philosophy of government.

What gets lost in all the rhetoric about crime in Tucson is that Arizona's communities already spend the most per capita of any state in the nation on crime control, save Nevada. Our communities already struggle under a high financial burden, yet those supporting Prop 200 would have us spend even more in vain.

Reductions in crime will not come from more police and more courts and more prisons. Effective crime control will come from better education, more economic opportunity, a vital civic community, and strong families. Prop 200 does nothing to pursue those goals; indeed, it only assures that less resources are available for those priorities.

The last thing we should do is hand representative political power to those who do not value or respect it, or worse, advocate to strip our democratic institutions of their powers. We cannot fix complex social problems with the blunt instruments of funding formulas and populist slogans. 

It is the American way to solve our problems by confronting them as a free and democratic society, served by those among us who are genuinely interested in coming together to debate and negotiate the best solutions possible. Representative democracy is a wonderful and powerful institution, we mustn't allow rank populist rage to bleed it of its vitality.

AZ AG Terry Goddard Ready for Debate on Legal Pot

by Michael Bryan

Terry Goddard's measure of political courage just went up slightly in my estimation: he went on national TV and suggested that this country should look seriously at the merits of legalizing marijuana to cut off the flow of money to drug cartels fueling violence along the Mexican border and throughout Mexico.

He backfills immediately by claiming that he is not personally in favor of legalization, but only that there should be a debate. Well, is Terry going to play a role in that debate? He doesn't say.

Well, Terry, if you're listening, here's your invitation to debate the issue. Myself, or any advocate of legalization you prefer, versus you. Anytime. Anywhere. Maybe here on this blog. I will certainly post any statement or responses from you or your office. Let's have that debate.

I'd love to hear why Goddard is not personally in favor of legalization. Knowing as he does how thinly stretched our enforcement and prosecutorial resources are, how porous our border is, how much of the Mexican cartel's income stems from the illegal profits from pot (Goddard claims 70%, though how he knows that is beyond me), and given the historical lessons regarding the effects of alcohol prohibition on crime in this country and the objective scientific evidence that pot is much less harmful than legal indulgences such as tobacco and alcohol, why does Goddard oppose legalization other than mere political caution?

Right now 44% of Americans support legalization - not a majority opinion - so of course politicians are skittish about coming out for pot. But in Western states, that percentage trends up to as much as 58%. Considering the strength of Western public support and what he has seen and learned as Attoney General of Arizona, I don't understand why Goddard doesn't lead from the front rather than the rear on this issue.

With U.S. Attorney General Holder finally halting the deplorable Federal raids that had been defying state legislative action to rationalize marijuana policy in their jurisdictions, now is the perfect time for a border state like Arizona to re-examine its own policies. At the very least, perhaps we could stop treating sick people as criminals in 2010. Maybe we can even embrace some decriminalization such as that which garnered the support of 43% of voters in 2002's Prop 203, despite furious opposition from all sides of the political establishment.

If ever this nation is going to seriously reform our drug laws, it must happen now that progressive forces are in ascendancy. And it has to happen from the ground up. Eight states repealed prohibition before the ball got rolling in the Federal government. There must a groundswell that forces the risk-averse to side with reason.

Terry, you took a positive step by seving up the legalization ball. Do you have the political courage to return the ball when volleyed?