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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
home equity revolving loan; lenders
Purpose
Expands, effective January 1, 2027, the definitions of consumer loan and consumer revolving loan by increasing loan amounts from $10,000 to $50,000 for consumer loans and from $10,000 to $30,000 for consumer revolving loans. Eliminates the home equity revolving loan. Allows a consumer lender licensee to collect finance charges on guaranteed asset protection waivers.
Background
A consumer loan is a direct closed end loan in an amount of $10,000 or less that is subject to a finance charge based on the principal amount of the loan. A consumer loan rate is the periodic rate of finance charges applied to an unpaid consumer loan balance. The maximum consumer loan rate is 36 percent for loans with an original principal amount of $3,000 or less. A consumer loan of $3,000 or more may be charged a consumer loan rate of up to 36 percent on the initial $3,000 and up to 24 percent on the remaining amount.
A consumer revolving loan is an open end revolving loan that is established by an agreement with an agreed-on credit limit of up to $10,000. A consumer may pay the balance of a consumer revolving loan in full at any time but has the privilege of paying in installments. A home equity revolving loan is a similar open end revolving loan secured by the consumer’s residence. A consumer revolving loan with a credit limit of $3,000 or less may be charged a periodic rate of up to 36 percent on the outstanding balance each monthly billing cycle. A consumer revolving loan with a credit limit of more than $3,000 and a home equity loan may be charged a periodic rate of up to 36 percent on the outstanding balance that does not exceed $3,000 and up to 24 percent on the remainder each monthly billing cycle (A.R.S. §§ 6-601 and 6-632).
Consumer loans of more than $10,000 and consumer revolving loans and home equity revolving loans with a credit limit of more than $10,000 are exempt from statutory requirements for consumer lending loans (A.R.S. § 6-602).
A guaranteed asset protection waiver is a contractual agreement that is a part of or an addendum to a borrower's finance agreement wherein a creditor agrees for a separate charge to cancel or waive all or part of the amount due on the borrower's finance agreement in the event of a total physical damage loss or unrecovered theft of a motor vehicle (A.R.S. § 20-103).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Expands, effective January 1, 2027, the definition of consumer loan by including a loan amount of $50,000 or less, rather than $10,000 or less.
2. Expands, effective January 1, 2027, the definition of consumer revolving loan by including a credit limit of up to $30,000, rather than up to $10,000.
3. Eliminates, effective January 1, 2027, the home equity revolving loan and the associated statutory requirements and regulations.
4. Extends the exemption from statutory consumer lending loan requirements to:
a) closed end loans of more than $50,000, rather than more than $10,000; and
b) advances on open end revolving loans with an agreed-on credit limit of more than $50,000, rather than more than $10,000.
5. Increases, from $3,000 to $10,000, the maximum original principal amount of a consumer loan that a licensee may contract for and receive finance charges on at a consumer loan rate of up to 36 percent.
6. Requires, for a consumer loan in an original principal amount of more than $10,000, a licensee to charge:
a) a consumer loan rate of up to 24 percent on the portion of the principal between $10,000 and $20,000 and a consumer loan rate of up to 18 percent on the portion of the principal above $20,000 but less than $50,000; or
b) a single blended consumer loan rate.
7. Increases, from $3,000 to $10,000, the credit limit of a consumer revolving loan that a licensee may contract for and receive periodic finance charges on at a periodic rate corresponding to an annual percentage rate of up to 36 percent.
8. Allows, for a consumer revolving loan with a credit limit of more than $10,000, a licensee to charge:
a) an annual percentage rate of up to 24 percent on the portion of the outstanding monthly balance between $10,000 and $30,000; or
b) a periodic rate corresponding to a single blended annual percentage rate.
9. Allows a licensee to contract for and receive and collect finance charges on the cost of the guaranteed asset protection waiver.
10. Increases, effective January 1, 2027, the consumer loan origination fee cap, from $150 to $300, that a licensee may contract for and receive and on which a licensee may collect finance charges.
11. Specifies that all consumer lender loans issued in Arizona's Regulatory Sandbox, including loans in excess of $50,000, rather than $10,000, are subject to statutory regulations for:
a) balloon payments;
b) finance charges; and
c) loan terms.
12. Requires, effective January 1, 2027, a consumer lender to provide, rather than mail, periodic statements for consumer revolving loans and a written receipt or binder at the time insurance is sold to a licensee.
13. Applies the modified consumer loan requirements and amounts to any contract or addendum entered into beginning January 1, 2027.
14. Makes technical and conforming changes.
15. Becomes effective on the general effective date, with delayed effective dates as noted.
Prepared by Senate Research
February 12, 2026
MG/hk