Payday lenders charging triple-digit interest rates will no longer be allowed to operate in Arizona after a 10-year-old law expires Thursday.

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Payday lenders charging triple-digit interest rates will no longer be allowed to operate in Arizona after a 10-year-old law expires Thursday.

Lending companies failed to persuade voters or the Legislature to extend the provision allowing the high rates.

“Their product is predatory,” said David Higuera, a volunteer and former political director for Arizonans for Responsible Lending. “It’s designed to trap the borrower and keep them in a repeated cycle of borrowing.”

The expiration of the law likely won’t end the industry in Arizona.

Payday lenders have bypassed restrictions in other states by continuing to charge high interest rates and fees on loans marketed as prepaid debit cards and sham auto-title loans, state Attorney General Terry Goddard said.

Lee Miller, a lobbyist for the industry, said many local companies might close, while national companies keep offering other products such as money orders, wire transfers and legitimate auto-title loans.

Cincinnati-based Check ‘n Go is closing all of its 34 locations in the state, said spokesman John Rabenold. Two other lending companies weren’t sure if their locations would survive.

Customers are disappointed to lose payday loans and will have fewer options to cover their bills, Rabenold said.

“They don’t know what they’re going to do,” he said. “There’s a reason they came to our stores.”

Payday lenders write checks for short-term loans while charging fees that can amount to interest rates of more than 400 percent on an annual basis. There are about 600 payday loan stores in Arizona, according to the state Department of Financial Institutions.

In 2008, the industry backed an effort to extend the loan practices. Arizona voters overwhelmingly rejected the measure.

Starting July 1, loans with annual interest rates exceeding 36 percent will be illegal in Arizona. Fifteen other states and the District of Columbia already use rate caps to limit payday loans, according to the Consumer Federation of America, a nonprofit consumer advocacy group in Washington, D.C.

Earlier this month, Goddard announced a program to aggressively pursue violators after the law expires. His “Operation Sunset” plan includes a task force, public education campaign and consumer hot line. Goddard said about 200 lenders have filed for licenses to make auto-title loans once high-interest payday lending ends.

“We believe that a lot of people are ready by telling their customers to shift to auto-title loans, even if they don’t have a car,” Goddard said.

Kelly Griffith of the Southwest Center for Economic Integrity in Tucson said she is organizing volunteers to secretly shop at payday centers and notify the attorney general’s office of violations.

Griffith believes many borrowers don’t know what they’re getting into when they get a payday loan.

“It’s leaving families in worse shape then when they started,” Griffith said. “Many of them actually end up declaring bankruptcy.”

That’s what happened to 47-year-old Diane Lehman of Tucson, who declared bankruptcy after struggling for two years to reimburse payday lenders.

Ten years ago, Lehman was a single mom working full-time, putting herself through school and raising two young children.

She took out a payday loan and quickly discovered she couldn’t afford to pay it back.

“It was like a vicious circle that I couldn’t get out of,” she said.