Attorney General Brnovich Sees No Need To Regulate Arizona's High-Interest Loan Business
While consumer advocates circulate an initiative banning predatory car title loans, Arizona Attorney General Mark Brnovich appears to be siding with another high-interest loan business.
He's given the go-ahead for Illinois-based loan company Align Income Share Funding (AISF) to offer up to $12,500 loans without regulation or interest oversight.
Adam Ginsburgh with AISF, explained the company will offer fixed rate loans based on an individual's future earnings, much like a student loan.
"If over a three-year contract we fund a consumer $5,000," he explained, and the borrower for some reason is serially unemployed yet making monthly payments, "even if those payments are zero because they're unemployed, and over the life of that agreement they only pay us back $4,000 when we funded them $5,000, that's it. The agreement ends."
Ginsburgh said AISF uses underwriting standards to determine how many monthly payments are required.
Because it is set up like a student loan, there is no requirement to comply with federal "truth in lending'' regulations which require borrowers receive a sheet showing them the effective interest rate.
He said, however, AISF gives borrowers sufficient information to allow them to compare what Align is offering with more traditional — and state-regulated — consumer loans.
Brnovich was empowered to authorize exemptions from consumer lending laws in a new state statute creating a "sandbox'' for companies to try out new or unusual financial programs in Arizona.
Aide Ryan Anderson said what Align is doing meets the test.
"Allowing Align into the Sandbox is about giving a potentially new business model the chance to show that it's different under state law,'' he said. "We think they have a legitimate argument that it's not a consumer loan under state law."
Because it operates as a business loan rather than a consumer loan, Anderson said AISF does not need a license to legally operate in Arizona.