Arkansas Blog

"...fine of $300 to make a
consumer loan with an
interest rate over 17 percent.
Financial institutions are
exempt."

I don't know about such things. If over 17% is bad, why is it not bad if financial institutions do it?

ARK. BLOG: They're exempted by federal law.

You know, I've got mixed feelings about this. On the one hand, your're right, they are bloodsuckers, charging vastly exhorbitant fees for loaning small amounts of money. On the other hand, if they don't do it, and you don't have a relative rolling in jack, or the slots aren't paying off, where else are you gonna go? You're short $3-$500, and your check is late.... If you're not Mr. Bigshot, no bank's gonna loan you that money for a week. If you are Mr. Bigshot, you don't need it. They fill a niche in the market, and that's why they're so successful. I'd much rather see somebody going after the bastard VISA and MasterCard and Discover companies. The long term hurt those guys put on you is much worse than these "payday" guys.

Throughout the 1990s, the state PIRGs and the Consumer Federation of America (CFA) have documented the effects of financial deregulation on American consumers. One consequence of deregulation of interest rates, high credit card interest rates and high bank fees has been the rapid growth of the so-called predatory lending (or fringe banking) industry, which includes check cashing outlets, payday loan companies, rent-to-own stores, high cost second mortgage companies, sub-prime auto lenders, traditional pawn shops and the growing business of auto title pawn companies. This report examines payday lending in detail.

Executive Summary

Recommendations:

States should retain and enforce small loan rate caps and usury laws to protect consumers from exorbitant small loan rates charged by payday lenders.
States with no small loan or usury cap should enact a cap on small loans and keep licensed lenders under state credit laws. States that have already legalized payday lending should, at a minimum, lower permissible rates and strengthen consumer protections based on the CFA/National Consumer Law Center (NCLC) model act.
Congress should stop the national bank regulators, notably the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), from allowing nationally-chartered banks and thrifts to provide protection for payday lenders from state consumer protection laws, especially since no federal law regulates their activities. Even better, Congress should close the bank loophole, either by enacting a federal usury law that applies to banks or by prohibiting FDIC-insured financial institutions from making loans based on personal checks held for deposit. To set minimum standards for state laws and to rein in the banks, Congress should enact the "Payday Borrower Protection Act of 1999" (HR 1684) sponsored by Rep Bobby Rush (D-IL).
More states should enact tough campaign finance reforms and lobbying disclosure laws. States should put the data on the Internet to enable citizens to evaluate influence peddling by special interests.
Click on my handle for the full rerport..

On the other hand, if they don't do it, and you don't have a relative rolling in jack, or the slots aren't paying off, where else are you gonna go?

The same place they went before there were payday lenders, most likely pawn shops or look ahead a few months before buying too much.

Lwood, you sound pious and condescending. I suggest you educate yourself and read Barbara Ehrenreich's book, "Nickel and Dimed", on (not) getting by in America. In it, you will learn that many truly poor people are not in their desperate conditions due to 'over-shopping'.

"In it, you will learn that many
truly poor people are not in
their desperate conditions
due to 'over-shopping'.
Posted by: WillNYC"

I suspect Lwood was not talking about those folks, but instead was talking about those in desperate conditions due to over-shopping.

"In it, you will learn that many truly poor people are not in their desperate conditions due to 'over-shopping"

I understand that Will, been there my self. I realize unforseen medical expenses can wipe out a family quickly. However I know 6 people who took bankruptcy ended up in dire straits for a few years and alll of it due to overspending, discretionary spending.
I was also a landlord for 20+ years and watched most of the non-paying people-who it was necessary to evict-do foolish things like pay $80-90 mo for premium cable, and run up piles debts for new, junk furniture, motorcycles, ski boats, etc. Drugs, cigs and booze were a biggies too.
I know elderly who are too proud to mention how broke they are and would not ask for help. They just do without and those folks damn sure need help with our excessive sales taxes since they haven't paid an income tax in years. They need a break on their meds too, not the bullshit Bush and Big Pharma doled out.
What needs to said is that people who are vunderable need to educated on how to avoid loan sharking from credit cards and banks, pay-day lenders, etc. This should happen in public schools but it doesn't, except in a few rare cases.

In the last legislative session, I asked my senator to please vote against payday lending. My senator's excuse was, "If a single mother of three needed money badly, where would she go?" I replied that was not an excuse for excessive interest.

Senator Tracy Steele really worked on this issue but he received very little support from other senators. Do you think this could possibly be another example of excessive lobbying for excessive interest? Surely not in the Arkansas Legislature!

I think I understand where you're coming from there, Lwood, but interest is nothing more than a "penalty" for borrowing, and these usurious rates (I use the term in the biblical sense, not the strict legal sense) "penalize" MOST those who are LEAST able to afford it--rather obviously, since they are borrowing the smallest amounts.

It has been shown in several Third World countries (how soon will we be one?) that small amounts of money can be lent at reasonable rates at a profit, when that is the purpose of your business. If the purpose of your business is to get rich from eating up week-to-week paychecks, you are a bloodsucker. "Helping people" make ends meet by stretching the ends until they meet in the middle is just predatory.

I don't mean *you*, Lwood, but a person in such a business.

Another thing--such lenders who are fined should pay the fines to the borrowers--PLUS court costs and legal fees, if there are any.

I would like the consumer friendly way Ark's old usury law worked, when guilty of violating it , the debt and interest were cancelled.

The payday businesses are regulated by the state of Arkansas.

The state needs to do a better job of enforcing the current law that prohibits rollovers of check advances.

The truth that no one wants to admit it, but banks really don't want your business if you don't keep a balance of 5000.00, no matter what they tell you.The only reason is that the payday lenders do as well as they do is as already mentioned, they loan money when others won't.No bank will loan under the 5000 limit either any more and they require 4 good current credit accounts.Try to do all that on minimum wage.The days of going in to your local bank and getting a small personal loan, are long over unless you are in a few small towns across the state.The excuses that the "poor" spend their money on the wrong thing is no excuse for allowing this to happen.

Max,

Your fiery one-sided rhetoric about payday lenders, calling them bloodsuckers without covering both sides of this issue, makes we wonder whether you are editorializing, or just blogging your opinion.

You know a good journalist covers both sides of an issue. I thought you were a good one, but your half-truth arguments make we wonder.

You need to do better research.

Arkdude

In my last statement 1st National Bank informed me their charge for a returned check was going up from 25 bucks per check to 27 bucks. Guess that damn war for oil in Iraq is flinging shrapnel all the way over to Fort Smith.

There was a time I had to use the float to make ends meet. Now and then my timing was off and I got clobbered. Poor people have poor ways my daddy used to say.

Now and then, due to 2 checkbooks running around town and poor husband-wife communications we still manage to bounce a check now and then. Should we, NO! Do we.....a couple of times a year. Can we afford it? Barely.

I'm not crying here for us to be exempt, but at the end of the year when you add up the charges for the handy float at 25 a whack, plus a few bounced check charges....it's a pretty good pile of money.

I say that because I too agree that payday lenders suck, but mainline financial institutions do their own brand of sucking. The bottom line is that Jesus might be your friend, but don't count on anyone else.

I have read thru the laws covering payday lending in Arkansas and it wasn't any fun. But it looks to me that a good start would be to enforce the laws already on the books and find out why this hasn't been the case in the past.

We'd all jump out of our cars if we saw someone kicking a poor little kid by the side of the road. Sucking poor parents dry is at least as cruel to a poor kid as giving him or her a good belt across the mouth. We are the richest country in the world, we can do better.

An interesting list of sponsors. Harrelson, the House Majority Leader; Key, the House Minority Leader; Womack, the Senate Minority Leader. From very liberal to very conservative.

Both Senators are part of the Brotherhood according to the Times list today. Rep. Maloch is being urged to run against Percy Malone who is very close to the lobbyists for the payday lenders.

How can any intelligent person
argue that payday lenders
are a necessary evil?

What did people do before
payday lenders?

They went to family, friends,
and the church for help.

Where are the churches
today? Do churches not
provide help anymore?

Is there no government help
available anymore?

At the very least, Arkansas
should provide an affordable
means by which the poor can
get a short-term loan for
emergencies.

There is something very
wrong with a society that
allows those with the least
to be taken advantage of by
others.

If only the poor had to pay
high gas prices nobody
would give a damn.

Think about it....

"An interesting list of sponsors. Harrelson, the House Majority Leader; Key, the House Minority Leader; Womack, the Senate Minority Leader. From very liberal to very conservative..."

In politics, greed/self-interest are the great equalizers. Every now and then (and getting rarer) the Dems seem willing to leave a few crumbs for the rest of us. The Repubs, on the other hand, tend to follow the scorched-earth policy: Not a crumb left behind.

Evidently there isn't a Constitution/law that industrious politicians/lobbyists can't circumvent. 'Designated' taxes are another hurdle politicians have learned to overcome. Now they often consider, say, a tax to fund a new jail as a suggestion rather than as a mandate.

These interest rates are immoral and illegal. But I don't see much difference between the payday lenders and most of the banking giants (aka the credit card giants). At least the payday gang isn't using federal tax money to support most of their fleecing.

I find it interesting that blue laws, anti-gay marriage amendments & slavery were all justified at one time or the other with bible quotes and yet when the bible says not to touch the skin of a pig or not to charge interest on loans Christians everywhere develop a reading disorder.

"The hopes of the Republic cannot forever tolerate either undeserved poverty or self-serving wealth." Franklin D. Roosevelt

"I'm not crying here for us to be exempt, but at the end of the year when you add up the charges for the handy float at 25 a whack, plus a few bounced check charges....it's a pretty good pile of money."

DBI, this issue is raised often, but comparing financial institution charges to payday lending interest rates is really apples and oranges.

You pay those bounced check fees and similar charges only if you don't abide by the terms of your financial transaction. If you don't bounce a check, you don't pay any overdraft fees. With a payday loan, simply abiding by the terms of the transaction gets you gouged.

Raising this point is legitimate. However, payday lenders and their lobbyists (that would be you, right, Arkdude?) try to use this as a smoke screen to keep on screwing people and keep on piling up the profits.

Bottom line: the Arkansas Constitution says you can't charge more than 17% interest a year. If payday lenders insist on charging more than that, then they should be prosecuted and fined. Period.

Sounds like may of them make
more than $300 on a loan. I
don't think a $300 fine, if they
are even caught and found
guilty, will do much of anything.