Arizona Payday Loan Laws: The Ultimate Legislative Guide

In 2023, payday lending is still a controversial topic in America. While many Americans find the practice of usury inhumane and distasteful, there are just as many (if not more) who feel that businesses should have free reign to do as they please. Because states have the power to regulate payday lending within their borders, the rules vary significantly across the country depending on which side of the argument a given state falls.

Below, you’ll find an explanation of the Arizona payday loan laws and an exploration of the industry in the state.

READ MORE: States where payday loans are illegal

Payday lending status in Arizona: Prohibited

Payday lending is illegal in Arizona and has been for a little over a decade. In 2010, they allowed the law that had been protecting payday lenders to expire. They have since upheld this stance despite the efforts of payday lenders, who have attempted to overturn the laws multiple times by reinstating payday loans under various names.

Loan terms and debt limits in Arizona

• Interest rate (APR): 36%
• Maximum loan term: Varies by principal. See below for more details.

The Arizona payday loan laws are less nuanced than states that still allow payday loans, but there are some additional rules to know. Take a look at the official state website for the original legislation.

READ MORE: Guide to debt relief in Arizona

Arizona payday loan laws: How they stack up

The war on payday lending has been going on for decades. It’s been an issue for so long that every state has had to weigh in. As it stands, many states have laws that explicitly allow payday lending to continue.

Three states (Connecticut, Georgia and West Virginia) have specific laws restricting the industry. Another 18 have used interest rate caps that have led payday lenders to end operations in the state. In addition to Arizona, the following states have implemented strict interest rate caps:

Arkansas, Colorado, Hawaii, Illinois, Maryland, Massachusetts, Minnesota (as of Jan. 1, 2024), Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Dakota and Vermont.

READ MORE: States where payday loans are illegal

Rates, fees, and other charges in Arizona

The Arizona payday loan laws state that the interest rate (APR) can’t exceed 36% on any consumer loan that’s $3,000 or less. On consumer loans that are larger $3,000, the APR on the first $3,000 of the loan can’t exceed 36%. On the amount of the loan that’s above the $3,000 threshold, the APR can’t exceed 24%.

Arizona also has a few other rules for allowable fees:

• Late fees may be up to 5% of the amount of any installment not paid within seven days after its due date.
• Loan origination fees may be up to the lesser of 5% of the initial principal balance or $150.

These are separate from the 36% limit on interest rates and lenders should not include them into the loan balance subject to interest.

READ MORE: Payday loan consolidation and relief that works

Maximum loan term in Arizona

Loan terms in Arizona depends on the size of the loan in question. Here are the maximum loan terms at each ranges of principal values:

• $0 to $1,000: 25 months and 15 days
• $1,000 to $2,500: 36 months and 15 days
• $2,500 to $4,000: 48 months and 15 days
• $4,000 to $6,000: 60 months and 15 days

For loans with principal balances greater than $6,000, there are no legal payment term requirements.

READ MORE: How to get out of payday loan debt

Are tribal loans legal in Arizona?

Technically, Arizona’s interest rate cap on payday loans makes all forms of payday lending in the state illegal. However, that hasn’t stopped tribal lenders from issuing loans.

Native American tribes are sovereign nations in the United States. That means they’re generally immune to state regulations, and it’s hard to sue them for breaching the laws of the states in which they reside, though they usually follow applicable federal laws.

Tribal lenders are a type of short-term loan provider that partners with Native tribes to try and share in their tribal immunity. They use that as an excuse to sidestep the regulations meant to protect consumers, such as the rate restrictions on payday loans. Many tribal lenders charge interest rates with APRs as high as 700%.

Lenders in Arizona must be licensed by the Arizona Department of Financial Institutions. Many tribal lenders are not appropriately licensed by states, and the loans may not be legally collectible. If you suspect that you have a loan from an unlicensed lender, please contact a Legal Aid attorney for advice.

READ MORE: Is my payday lender licensed in my state?

Consumer information

The entity responsible for enforcing Arizona payday loan laws is the state’s Department of Insurance and Financial Institutions (DIFI). They give out licenses to Arizona’s financial institutions (including its lenders), monitor their activities, and uphold state regulations. They investigate any complaints that consumers make, so they’re a helpful resource for Arizona residents who have been the victim of any illegal financial practices, including payday lending.

The Arizona DIFI maintains a public record of financial institutions’ licenses, so consumers can check that a lender is in good standing before borrowing from them. They also provide copies of the official regulations that govern payday lending in Arizona.

Where to make a complaint

The Arizona DIFI is also the best place to register a complaint about illegal lending activities within the state. Here’s the contact information: 

• Regulator: Arizona Department of Insurance and Financial Institutions
• Address: 100 N. 15th Street, Suite 261 Phoenix, AZ  85007
• Phone: 602-771-2800
• Fax: 602-381-1225
• Email: [email protected]
• Link to website: File A Complaint | Arizona Department of Financial Institutions

Consumers can also submit a complaint to the Consumer Federal Protection Bureau (CFPB). They are the federal government’s organization dedicated to helping consumers with financial issues, including payday lenders.

Number of Arizona consumer complaints by issue

The following statistics are from the CFPB Consumer Complaint Database as of February 2021.

The cost complained about payday lender in Arizona: Big Picture Loans, LLC

Payday lenders are nothing if not tenacious. Although the practice is illegal in Arizona, payday lenders managed to find some workarounds that allow them to maintain a presence in the state. To survive, they now operate:

• Online, thus blurring the line as to whether state laws apply to them
• Under the authority of a Native American tribe, granting themselves tribal immunity

Big Picture Loans, LLC uses both of these strategies to full effect. They have no storefronts in Arizona, electing to provide loans entirely from their website. Big Picture Loans calls their products installment loans, but there’s little to no difference between them and payday loans.

They lend to just about anyone with a paycheck and have the same outrageous interest rates that make payday loans so difficult to pay back. Their repayment terms are longer (months, not weeks), but that only gives them an excuse to offer larger loans and charge people more. They offer loans with:

• Principal balances of $400 to $3,500
• Annual Percentage Rates (APRs) of 35% to 699% (the minimum rate for new customer rates is 350%)
• Repayment terms of 4 to 18 months

Big Picture Loans gets away with charging rates that exceed the Arizona maximum because of their status as a tribal lender. They’re an extension of Tribal Economic Development Holdings, LLC. As a wholly-owned and operated economic arm and instrumentality of the Lac Vieux Desert Band of Lake Superior Chippewa Indians, they have a (questionable) excuse to ignore all state laws.

Most common complaints about Big Picture Loans, LLC

Statistics updated as of: February 10th, 2021

The most common complaint consumers make about Big Picture Loans is that they charge unexpected fees or interest. There are two possible explanations for this:

1. Borrowers failed to read the fine print.
2. Big Picture Loans has hidden fees that are surprising their customers.

It may be that consumers are to blame for not knowing what Big Picture Loans costs, but it’s not likely. Big Picture Loans’ website advertises their rates and fees pretty openly. Either way, it reflects poorly on Big Picture Loans. Clearly, their borrowers are not understanding just how expensive their loans really are. Even if they see the APR range of 36% to 699%, they’re not fully comprehending what that means until they see the charges hit their bank account.

If the issue is that Big Picture Loans is charging fees that aren’t in their contract, then it becomes even less defensible. Unfortunately, it’s difficult to sue Big Picture Loans for an offense like this due to their tribal status.

The top 10 most complained about payday lenders

Payday loan statistics in Arizona

• Arizona ranks as the 16th state for the most overall payday loan complaints
• Arizona ranks as the 21st state for the most payday loans per capita
• There have been 18,281 payday loan-related complaints made to the CFPB since 2013―374 of these complaints originated from Arizona
• The estimated total population in Arizona is 7,278,717 people
• There are 5.1383 payday loan complaints per 100,000 people in Arizona
• The most popular reason for submitting a payday loan complaint is “charged fees or interest you didn’t expect”

READ MORE: Payday loan debt statistics

Historical timeline of payday loans in Arizona

The Arizona payday loan laws haven’t always been what they are today. They’ve come and gone as America itself has changed over the decades. Here’s a summary of the history of Arizona payday loan laws: 

• 1912: Arizona becomes America’s 48th state.
• 1916: The Uniform Small Loan Law comes into effect, limiting the majority of states to loans between 18 and 42% APR.
• Mid to late 1900s: Countrywide regulations on lenders begin to loosen. Arizona is among the many states to exempt payday lenders from usury laws. Their APRs can be as high as 459%.
• 2008: The laws exempting payday lenders are going to expire soon. Payday lenders put forth the Payday Loan Reform Act in an attempt to extend their exemption. The bill does not pass.
• 2010: Payday lenders exemptions expire, subjecting them to a 36% APR limit. There is a mass exodus as most payday lenders withdraw due to the new laws.
• 2017: An attempt to legalize payday loans again under the guise of “consumer access lines of credit” and “flex loans” fails. Payday loans remain illegal.

While payday loans are still illegal in Arizona in 2021, there’s no guarantee that will stay true forever. Arizona’s citizens and lawmakers have to remain vigilant to make sure that payday loans don’t resurrect themselves under another name.

Just as importantly, they need to be proactive about combatting false tribal lenders who use the excuse of tribal immunity to break the laws already in place.

Flashback: An Arizona payday loan story

Payday loans have been illegal in Arizona for over a decade, but they live on in the form of tribal loans. It’s easy to condemn the Native American tribes who allow these loans, but there are two sides to every story. Let’s take a look at a fascinating example that occurred back in 2011.

Payday loans had recently become illegal in Arizona, and their lenders were struggling to find a way to remain relevant. The idea of a tribal payday lender was relatively new. Existing payday lenders realized that they could evade the restrictions by partnering with Native American tribes. As long as they could prove that their companies were an extension of the tribe on paper (or at least make it hard to prove otherwise), they could effectively shrug off lawsuits.

Raycen Raines, an insurance salesman, saw this as an opportunity. He brought the idea as a business proposition to the Oglala Sioux tribe, and they found the offer tempting. Native American tribes have suffered in America since the birth of the country, to put it mildly. Many tribes still struggle with high levels of poverty, and the Oglala Sioux had unemployment rates of 80% at the time.

Though the money would’ve helped them, they initially turned down the offer, claiming that it was immoral (which was admirable) and not a good enough deal for them (perhaps less admirable).

Behind the tribe leaders’ backs, Raycen Raines moved forward with his plan. Sandy Two Lance, a member of the community, helped him put his plan into motion. They set up the Wakpamni Lake Community Corporation as an extension of the tribe, allowing it to operate in Arizona as Cash Cloud, LLC, despite the lending laws.

It didn’t stop there, either. Many other payday lenders now claim association with the Oglala Sioux, including Bayside Cash, Boulevard Cash, Fast Money Store,  and more. Allegedly, half of the funds from these loans now go to Raines, while the other half supports the tribe’s community, despite some of their leaders still claiming that they have nothing to do with the company.

READ MORE: How to get out of high-interest tribal loans

The bottom line: Should you take out a payday loan in Arizona?

The Arizona payday loan laws are in place for good reason. In fact, they’re in place for several good reasons. Payday loans are:

• More expensive than any other form of lending, often by a factor of ten or more
• So short-term that borrowers don’t have enough time to save up the cash necessary to repay them
• Too often held by lenders who are willing to bend the rules to make a profit

The most common modern incarnation of the payday loan in Arizona is the tribal payday loan. They and their first cousins (tribal installment loans) have the potential to be even worse than the previous versions due to their complete disregard for consumer protections.

Lenders who claim tribal sovereignty will fight tooth and nail against the authority of state and federal law. To successfully sue them often requires proving that they’re not an extension of the tribe they claim to be an affiliate of, which is a lot easier said than done.

Stay away from any loans you encounter that even remotely resemble payday or tribal loans. If you have bad credit and need a loan in Arizona, work with a lender who follows the Arizona payday loan laws and keeps interest rates below the legal limit.