The people going after the bloodsucking cash advance/payday lending industry want to know what Sen. Blanche Lincoln is up to.
Legislation she's introduced -- here and here -- would override the state Constitution's limit on interest as it pertains to cash advances on checks and other retail lending. Yes, the language says the interest cap would remain 17 percent. But lawyers believe other state consumer protection laws would be overridden in the process, laws that are now being used to make recoveries for victims of the loan sharks. And with the Constitution overridden, the lawyers wonder if the special interest-owned legislature could step in and impose whatever limits it wanted, if any, for the payday outfits.
Lincoln's legislation would apply only to Arkansas. In one lawyer's opinion, it would also breathe new life into the title pawn business, a loan sharking activity stomped out by Attorney General Winston Bryant more than a decade ago. People victimized by excessive interest by such lenders would only have recourse in federal court, based on recent court decisions.
"It's outrageous," says Todd Turner, the Arkadelphia lawyer who's been pursuing the bloodsuckers for nine years. "I can't believe that my U.S. senator is working to override the state Constitution without a vote of the people."
UPDATE: Late in the day, I got in touch with Sen. Lincoln. She says Turner misinterprets the measures, which she says are aimed at helping small businesses not included in legislation several years ago that gave some exemption from usury limits to banks and need more interest flexibility. More on the jump.
Sen. Lincoln said the agency most in need of the ability to have higher interest rates is the Arkansas Student Loan Authority,which borrows money for loans, but which is limited to the interest it can charge on bonds sold to produce the loan money. The limit is 5 points above the federal discount rate (currently 2.25 percent) or 17 percent, whichever is lower, and the lower rate isn't marketable, she said.
But Lincoln said that low interest ceiling also affects furniture stores and other small retailers. Moving the interest rate up to 17 percent (from 7.25 percent) would help them, but still keep a cap in place. It wouldn't override constitutional limits except up to the 17 percent level and that's not high enough to satisfy payday lenders, she said. "They've complained about this legislation," she said.