Be Wary of Arizona’s Flex Loans

Payday Loans

2020 has been a stressful year, so far. In the midst of all that has happened, over 30 million Americans lost their jobs. Some projections estimate that the unemployment rate could rise to over 25% through the second half of 2020. The CARES Act and other legislation was enacted in an attempt to bandage the economy during these harrowing times.  

In Arizona, almost $2 Billion has been paid out to unemployment claims, with thousands of new claims filed every week and tens of thousands still waiting to be reviewed. In short, people are hurting. There is a struggle – mentally, emotionally, and financially. People are not getting their much-needed financial assistance; there is a backlog of claims; the partisan fights in Washington are causing delays in economic relief; and this is a “La Nina” year so the summer will be hot.  

People are turning anywhere they can to keep the lights on. One unfortunate option still available is the “Payday” Loan, which was banned in 2010, and then brought back under a cloak of legislation known as the “Flex” Loan.  The pre-ban Payday Loans could have reached a percentage rate at high as 459%, in some instances.  ARS §6-632 (Flex Loan legislation) came into law on July 24, 2014.  This new law provided for a cap of 36% interest on unsecured consumer loans of $3,000 or less, 24% interest on any amount over $3,000 and capped the origination fee at $150.  Allegedly, the lenders are still getting triple digit interest rates under this statutory scheme, which does not necessarily alleviate the financial pressures consumers are currently facing.  Car Title Loans, still alive and well, are another unaffordable mechanism for consumers to get trapped into insurmountable debt for an ill-conceived quick fix.  Because of creative ways in re-writing the loans and tacking on additional charges, consumers could be left with debt twice, three times, or more than what was borrowed.  Borrowing from Peter to pay Paul does not effectively help consumers in trying to catch up on bills and buying other necessities.  

As creative as these lenders are with increasing the debt burden, they are equally so with their advertising. Be very cautious at online advertising of loans described as “stimulus relief” or “no credit check required”.  These predatory lenders will go so far as to advertise “free services” for healthcare workers. The bottom line is that these types of loans are very disadvantageous to the borrows and prey on desperation.  Don’t get caught up in the false hope. 

The better action to take is to call your existing creditor and communicate to them of the hardship you are experiencing and work out a plan with them to give you some temporary relief so you can get back on your feet. Postponing payments is a much better option for them as well. Creditors are understanding during these times and are much more willing to help when their customer calls them and takes the time to explain what the hardship is and shows a willingness to get caught up. Picking up the phone, in this day and age, goes a long way. Everyone is experiencing some form of struggle right now and because of that, solidarity is easily felt. There are literally millions of people not paying their bills and not communicating with their creditors. You will stand apart by taking the time to explain to your creditors the issues you are experiencing and just asking for help.  

This article provides general information about certain legal topics. The law, however, changes quickly and varies from jurisdiction to jurisdiction. None of this information should be used or relied on as legal advice or opinion about specific matters, facts, situations or issues. You should consult a lawyer about your particular circumstances before you act on any of the information contained in these pages because the information may not apply to you or your problem or may not reflect current legal developments.

Robert R. Northrop is an attorney at Parker Schwartz, PLLC and focuses his practice in Real Estate and Commercial Litigation. He can be reached by phone at 602-282-0469 and by email at