A study released last week reaffirms the predatory nature of payday loans and should serve as a clarion call for the Arizona Legislature to sweep payday lenders out of the state as soon as possible.

The report titled, "Financial Quicksand," was released Thursday by the Center for Responsible Lending, a Washington, D.C.-based nonprofit and research organization. The study, which used conservative estimates, found that in 2005 payday lenders pocketed $4.2 billion in excessive fees from Americans who seek a two-week loan and end up trapped in debt.

Conversely, in the minority of states where payday lending is prohibited, the study found that borrowers are expected to save $1.4 billion in 2006 by receiving loans from sources other than payday lenders.

The study was the first to show the financial impact of payday lending on a state-by-state basis. It found that Arizonans paid $139 million in excessive fees to payday lenders in 2005. Arizona had more than 700 payday-loan shops in 2005, the study said.

"This is hard-earned cash being siphoned out of the wallets of working people," said Julian Bond, chairman of the NAACP, which has fought abusive financial practices. "This $4.2 billion is much-needed monthly benefits being squeezed out of the pocketbooks of retired and disabled folks.

"This $4.2 billion should be helping people stay firmly put in the middle class, rather than keeping them trapped in the quicksand of poverty."

For its calculations, the study considered only those borrowers who took out five or more payday loans per year. Americans who took out four or fewer payday loans were not considered to be caught in a cycle of debt, though they still were exposed to the payday-loan industry's high fees and interest rates — which typically run about 400 percent annually.

Payday loans have been a problem in Arizona since the Legislature in 2000 exempted payday lenders from the state's usury law, which caps the interest rate on loans made by financial institutions at 36 percent annually.

Since 2000, payday-loan shops and storefronts have become ubiquitous on corners and in shopping plazas in many areas of Tucson.

The good news that came out of last week's report is that state legislatures can fix the problem of predatory lending.

Michael Calhoun, president of the Center for Responsible Lending, said several states have refused to grant or extend payday lenders' exemptions from consumer-loan laws. In those states, payday lenders have quietly closed up shop and left.

Arizona can do the same.

State Rep. Marian McClure, R-Tucson, has been leading efforts in recent years to revoke the law that gave payday lenders the right to operate in Arizona. Though the law is due to sunset in 2010, McClure and others in the Legislature would like to hasten payday lenders' departure.

We, too, would like to see that happen.

Momentum against payday lenders has been building over the last few years and we believe the time is right for the Legislature to end this harmful practice that victimizes the poorer members of our community, many of whom lack the financial literacy to know the damage that a payday loan can bring.

The "Financial Quicksand" report found that 90 percent of payday lending revenues come from borrowers who cannot pay off their loans when due, rather than from one-time borrowers dealing with a short-term financial crisis. The study found that a typical payday borrower pays back $793 for a $325 loan.

Jean Ann Fox, director of consumer protection for the Consumer Federation of America, said in a conference call to announce last week's report that "a payday loan is a defective product. If it works the way the lenders intend, then consumers get trapped in debt."

Georgia, North Carolina and a handful of other states have effectively shooed away payday lenders by enforcing reasonable usury laws.

Arizona legislators can do the same by reinstating the 36 percent interest rate cap on loans. We urge state lawmakers, and Southern Arizona's delegation in particular, to protect our community's families from this abusive lending practice.