PHOENIX -- One of the backers of Proposition 200, the failed payday reform proposal on the Nov. 4 ballot, believes its defeat could cost Arizona 2,500 jobs.

State law caps allowable interest rates on loans at 36 percent a year, but payday lenders have a special exemption that expires in 2010. Meanwhile, their interest rates can run as high as 450 percent.

Stan Barnes, who managed the "Yes on 200" campaign, said the payday loan industry will move out of the state once the interest cap exemption ends.

He believes people would rather reform payday lending than lose it altogether.

"The demand for pay day loans won't automatically go away when the industry is put out of business," said Barnes, adding that he fears borrowers will seek out riskier avenues like unregulated Internet lenders.

Many Arizonans will be out of work if payday lenders shut down, Barnes said, "because in the short-term, unsecured, small-dollar loan market place, there is no industry that would provide any consumer option."

The jobs will be gone "unless the sunset provision that currently is in the law is lifted," said Barnes.

Supporters of the payday loan industry say they are needed for people who face an immediately cash crunch. Critics say payday lenders get users into "debt traps" because many borrowers can't repay the loan on time and extend it, with additional fees.

"The facts are the facts, and the facts are in support of a short-term, unsecured, small-dollar loan product for Arizona consumers," Barnes said.

The Legislature may be asked again to extend the interest cap exemption for the payday lenders.