rates at 24% except as otherwise authorized by law. If a separate payday loan statute autho- rizes interest rates of 300%, the criminal usury statute will have no effect on payday loans. But if no other provision of state law allows a higher interest rate for payday loans, then the 24% cap will apply to them.
Taking these factors into account, if the rate cap in a state’s criminal usury statute is inapplicable if another state law allows a higher rate or if a state’s criminal usury statute does not contain its own rate limit but simply references the limits in other state law, the Scorecard grades the state as follows:
If no other state law allows a rate higher than 36% for any of the four loan prod- ucts in the Scorecard, the criminal usury law is termed a “Soft cap,” and the grade is a P.
If the criminal usury statute contains its own rate cap but other state law allows a rate higher than 36% for any of the four loan products in the Scorecard, the APR includes a plus sign (“+”) to indi- cate that the cap can be higher than the stated amount, and the grade is an F.
If the criminal usury statute does not contain any limits on rates but criminal- izes making loans above the caps set forth in other state laws governing the four loan products, and any of these products can have a rate higher than 36%, the criminal usury law is deemed to have “No cap,” and the grade is an F.
And a nal grading rule for the criminal usury cap category:
If the state does not have a criminal usury law, the Scorecard states “None,” and the grade is a NA (not applicable)
8 5 Updated Small Dollar Loan Products
because the Scorecard does not penalize for the lack of a law in this category.
IV. STATE LAW CHANGES SINCE THE ORIGINAL SCORECARD
Some recent state law developments are high- lighted below: all those that have affected the statutory maximum APR for any of the four products in the updated Scorecard, as well as some that have not. In the latter category, the focus is on legislative developments that have closed prior loopholes in relevant state laws or addressed the challenges posed by Internet payday lenders who make loans to a state’s residents without following the state’s laws.33
Arizona: Arizona’s law authorizing payday lending contains a sunset date of July 1, 2010. In 2008, voters rejected Proposition 200, a bal- lot initiative that would have allowed payday lenders to operate in the state permanently.34 In 2010, legislation that would have had the same effect was killed in committee. If the sun- set occurs as scheduled, single payment loans
33 See Jean Ann Fox & Anna Petrini, Consumer Fed- eration of America, Internet Payday Lending: How High-Priced Lenders Use the Internet to Mire Borrow- ers in Debt and Evade State Consumer Protections (Nov. 30, 2004), available at http://www.consumerfed .org/pdfs/Internet_Payday_Lending113004.pdf (discussing particular problems with Internet payday lenders, such as trouble tracking them down after loans are made).
34 This consumer victory occurred over massive industry opposition; payday lenders spent almost fteen times more than opponents of the initiative. Tyler Evilsizer, National Institute on Money in State Politics, Lenders Couldn’t Buy Laws 1 (Aug. 18, 2009), available at http://www.followthemoney.org/ Research/index.phtml.
NATIONAL CONSUMER LAW CENTER