Payday loans in Arizona

Arizona payday-loan rules: the direct answer

Traditional payday loans are not a licensed product in Arizona. The law that authorized deferred presentment companies expired on June 30, 2010, and the Arizona Department of Insurance and Financial Institutions no longer licenses payday lenders. DIFI states that consumer loans charging annual interest above 36 percent, apart from specifically authorized fees, became illegal on July 1, 2010.

That does not mean every small loan is prohibited. A properly licensed consumer lender may offer a closed-end or revolving consumer loan under Title 6, Chapter 5. For principal of $3,000 or less, the maximum consumer loan rate is 36 percent. A national website using “payday,” “cash advance” or “fast funds” language still must connect an Arizona resident to a lawful product and an appropriately authorized creditor.

The decisive document is the agreement from the company actually extending credit. A matching service can advertise a broad nationwide range without being the lender, and a successful application screen is not evidence that an Arizona loan is legal. Identify the creditor, product, license, consumer loan rate, APR, fees, installment schedule and net proceeds before accepting money.

What a legal Arizona small loan looks like

Arizona defines a consumer loan as a direct closed-end loan of $10,000 or less for personal, family or household purposes that is subject to a finance charge. The consumer-lender chapter also covers qualifying revolving loans. Unless an exemption applies, a person located inside or outside Arizona may not regularly make, procure, advertise or solicit these loans to Arizona consumers without a consumer lender license.

This structure differs from a single-payment payday advance. Closed-end loan agreements generally provide approximately equal periodic installments, and the state sets maximum scheduled terms by principal band. A loan of $1,000 or less may run no longer than 24 months and 15 days. Larger balances have longer ceilings, reaching 60 months and 15 days for more than $4,000 but no more than $6,000.

Rate ceiling, origination fee and cost example

For an original principal amount of $3,000 or less, a licensed consumer lender may charge a consumer loan rate no higher than 36 percent. Above $3,000, it may apply 36 percent to the first $3,000 and 24 percent to the remaining principal, or use the equivalent blended rate described by statute. The consumer loan rate is applied to unpaid principal and is not identical to the all-in APR when authorized fees are present.

The lender may charge an origination fee of up to 5 percent of a closed-end loan, capped at $150. On $500, that ceiling is $25; on $3,000, it is $150. If the fee is deducted from a $500 principal, the consumer receives only $475 before any other permitted item. Compare both the face principal and the money actually available, because repayment is based on the contract balance rather than the deposit alone.

As a simplified illustration, $500 amortized over six monthly payments at a 36 percent nominal annual rate produces payments of about $92.30 and roughly $553.80 in scheduled principal and interest. Adding a separately paid $25 maximum origination fee makes the combined cost about $78.80. A financed fee, different dates or another computation method changes the result, so the lender’s Truth in Lending disclosure controls.

Allowed fees and prohibited extra charges

In addition to the origination fee, the statute lists specific charges that may apply in defined circumstances. A delinquency charge may equal 5 percent of an installment that remains unpaid seven days after its due date. A dishonored payment instrument can carry a service fee of no more than $25 plus actual charges assessed by the holder’s financial institution.

Other provisions address court costs, reasonable attorney fees after referral to an outside attorney, insurance and expenses tied to secured property. These are not blanket permission to add administrative, membership, processing or expedited-funding fees. Section 6-635 says the licensee may not directly or indirectly collect another amount in connection with a consumer lender loan beyond the charges the article permits.

Installments, disclosure and prepayment rights

A licensed lender must follow applicable Truth in Lending disclosure requirements. The Arizona agreement also carries an English-and-Spanish notice explaining that the consumer may request the initial federal disclosures in Spanish before signing. At a licensed office, the required notice says loan documents may be taken away for review before the consumer commits.

Approximately equal periodic installments make the due dates easier to audit than a vague promise to repay “over time.” Record the number of payments, frequency, amount, final due date, total of payments and whether an origination fee is financed or withheld. Balloon payments and prepayment penalties are prohibited for the consumer-loan structure described in section 6-637.

A consumer may pay a scheduled installment or additional amount early during regular business hours. The licensee may first apply the payment to finance charges accrued through that date. After payment in full or renewal, the lender must provide a written payment-and-release notice or return the original agreement marked paid or renewed, subject to the statutory details.

How to evaluate online loan offers in Arizona

The cards on this page are published reviews of national connection, referral or lead-generation services. They are not Arizona payday lenders and are not proof that a network contains an eligible Arizona creditor. In this state, any response must be evaluated as a consumer installment, revolving, bank, credit-union or other lawfully exempt product—not as a revival of the expired payday license.

Start with the final creditor’s legal name. Search DIFI’s financial institution and enterprise records when a state consumer lender license is claimed. If the company says it is a bank, identify its charter and use the appropriate federal or state regulator. Compare the license address and name with the agreement rather than searching only the marketing brand displayed before the redirect.

Late payment, collection and complaints

DIFI accepts financial complaints involving licensed consumer lenders and suspected unlicensed entities. Its process begins with the exact entity name and license search, followed by the agreement, payment history and correspondence. DIFI can review compliance and seek corrective or administrative action, but it does not award private damages or act as the borrower’s attorney.

Deceptive advertising or a business still presenting itself as an Arizona payday lender may also be reported to the Arizona Attorney General’s consumer complaint unit. Preserve the advertisement, URL, application screens, legal documents, bank records and a dated chronology. Report what happened rather than assuming the advertised brand and creditor are the same company.

Arizona comparison checklist and alternatives

Before borrowing, ask the original biller about a due-date change or hardship plan. Compare a bank or credit-union small-dollar installment loan, employer-based earned-wage option and community assistance available through 211 Arizona. The best alternative is the one with a documented total cost and a payment that fits without sacrificing housing, utilities, food, transportation or medicine.

1. Classify the response as an installment loan, revolving account, bank product, credit-union loan or another documented structure.
2. Identify the creditor and verify the DIFI license or applicable state or federal exemption before accepting funds.
3. Compare the consumer loan rate with the APR and itemize the origination fee, insurance and every conditional charge.
4. Record net proceeds, installment amount, payment count, due dates, total repayment and prepayment application.
5. Test the payments against essential expenses without assuming refinancing, a fee-based deferral or another loan.
6. Save the agreement, disclosures, consent records and proof of each payment until the balance and any lien are released.

Arizona payday-loan FAQ

Question 1Are payday loans legal in Arizona?

Answer

No traditional deferred-presentment payday license remains. Arizona’s authorizing law expired June 30, 2010, and DIFI says consumer loans above a 36% annual interest rate, plus specifically authorized fees, became illegal July 1, 2010.

Question 2Can an Arizona resident still obtain a small loan?

Answer

A licensed consumer lender, regulated bank, credit union or other lawfully exempt institution may offer a compliant installment or revolving product. Verify the actual creditor and product instead of relying on payday-style marketing language.

Question 3What rate can an Arizona consumer lender charge?

Answer

For principal of $3,000 or less, the maximum consumer loan rate is 36%. For a larger covered loan, 36% applies to the first $3,000 and 24% to the portion above it, or the lender may use the permitted equivalent blended rate.

Question 4What origination fee is allowed in Arizona?

Answer

A licensed consumer lender may charge up to 5% of the closed-end principal or revolving credit limit, but no more than $150. That authorized fee can make the all-in APR differ from the consumer loan rate.

Question 5Where can an illegal payday-loan offer be reported?

Answer

DIFI accepts complaints about consumer lenders and unlicensed financial entities. Deceptive payday advertising may also be reported through the Arizona Attorney General’s consumer complaint process.

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