PHOENIX — A 10-year licensing agreement that allowed payday lenders operating in Arizona to originate loans above a 36 percent usury cap will be allowed to expire tomorrow, causing many payday lenders in that state to switch to offering automotive title loans — or close their doors.

The state's maximum annual interest rate for title loans will remain at 204 percent. The Durham, N.C.-based Center for Responsible Lending has reported that more than 200 Arizona payday loan stores have applied for title loan licenses since 2008, when a measure to extend the payday loan licensing program was struck down by voters.

Arizona will become the 16th state to apply the same annual interest rate to payday lenders as banks and finance companies. A similar movement is afoot at the federal level, where Sen. Dick Durbin (D-Ill.) has proposed an amendment to the Truth in Lending Act to include a 36 percent cap that would apply to all creditors. Durbin's proposal was put on the back burners as the recently enacted financial reform measures went before the House and Senate this year.

The specter of a national usury cap hangs over independent automotive dealers, especially those who carry their own paper. The July issue of F&I and Showroom features a Q&A in which National Alliance of Buy Here, Pay Here Dealers founder Kenneth Shilson expresses his distaste for legislators who group BHPH dealers in with predatory loan practices.

"The BHPH business will not get a get-out-of-jail-free card," Shilson told the magazine. "I wish it would. ... If they think the government can head off another financial crisis with more regulation, they’re wrong. What will really happen is people will find "alternative" financing on their own, and that will create a black market."