LEGISLATION TARGET: Bills are aimed to help and hurt the high-interest lending practice of such loan shops that have begun operating in Arknass since a change in the attorney general's office.
I've mentioned before the efforts by payday lender
s (small loans with exorbitant fees to cloak usurious interest) to get re-established in Arkansas now that longtime foe Dustin McDaniel
is no longer attorney general. Attorney General Leslie Rutledg
e is too busy defending polluters, guns and gay discrimination in other states to be concerned with schemes to gouge punishing interest rates out of poor people in Arkansas.
This fits, generally, with a legislature aimed at screwing the lucky duck poor folks out of the few alms they do receive — food stamps, compensation for total disability on the job, recovery of damages from abuse and malpractice in court and so forth.
But back to payday lenders: Hank Klein,
a former credit union executive who's been fighting the good fight against the bloodsucker for years, brings me up to date on the various legislative efforts to encourage and discourage the practice in Arkansas.
Five bills are pending that deal with the lenders' efforts to get around the 17 percent usury cap in the Constitution. Three of the bills, Klein says, would allow effectively interest rates of 50 to 280 percent annually.
The scorecard for bad bills as reported by Klein:
HB 1742 (Rep. Rushing, Rep. M. Gray, Sen. Hester and Standridge) - Deceptive Trade Practices Act. Restricts the state's deceptive trade practices act in such a way (limiting class action suits) that it will be harder to hold predatory lenders accountable for harming consumers.
SB 671 (Sen. Hester) - Arkansas Traditional Installment Loan Act. Legalizes high-cost loans with costs ranging from 50% to 90% APR. This is more than 4 times the Arkansas usury cap. The bill also has a built-in debt trap. It allows the loans to be refinanced every four months, and industry data show that for these types of loans, more than 60% are refinanced annually, allowing lenders to charge new fees each time, as borrowers struggle to pay the unaffordable debt. Just like traditional payday loans, these loans are designed to be long-term debt traps. Refinancing is not a side-effect; it is core to the business model. The bill is backed by Mississippi-based high-cost lender, Tower Loans.
HB 1958 (Rep. M. Gray and Sen. Hester) - Credit Services Organization Act. Out-of-state predatory lenders are already using a model wherein they pose as “credit service organizations” (CSO) to charge high fees in excess of the Arkansas usury cap. We are working to stop that practice. In the meantime, HB 1958 would actually codify a key part of that business model, making it easier to circumvent consumer protections. (What? You thought the attorney general had a consumer protection division?) This scheme that out-of-state lender (CashMax Loan Services
) is using in North Little Rock and Hope is to pose as "credit services organizations" in order to offer loans at triple-digit interests of 280.82 percent. This bill is supported by Ohio-based lender, NCP Finance, which engages in this scheme in Ohio and Texas. Cheney Pruitt, a Texas resident and payday lender (and major financial backer of the medical marijuana amendment)(, is partnering with NCP to engage in this scheme in Arkansas through his CashMax stores in North Little Rock and Hope, Arkansas.
All the news isn't bad and one senator we've often disagreed with is credited with a piece of helpful legislation.
SB 658 (Sen. Rapert) - Credit Services Organization Act. Seals shut a phantom loophole which out-of-state lenders claim exists to make predatory loans in Arkansas. Even though the current law makes it clear that CSO fees are included in the Arkansas usury limit of 17% this new bill makes it VERY clear those loans (including all fees and charges) cannot exceed our Constitutional usury limit of 17%. We hope this bill will stop lenders like CashMax Loan Services, who currently operates in North Little Rock and Hope, Arkansas, from making high-cost predatory loans.
SB 725 (Sen. Rapert) – Prevention of Predatory Lending. This is still just a shell bill and so we don’t know enough yet to say if we support or oppose this bill. Based upon the title of the bill and Senator Rapert’s other bill (SB 658) that we do support we will probably support this bill when it is fully written.
Call your legislator.