I’ve mentioned before the efforts by payday lenders (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 Rutledge 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.

Advertisement

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.

Advertisement

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.

Advertisement

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.

Advertisement

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.

Advertisement

Call your legislator.

Be a Part of the Fight

Step up and make a difference by subscribing or donating to the Arkansas Times, the progressive, alternative newspaper in Little Rock that's been fighting for truth for 50 years. Our tough, determined, and feisty journalism has earned us over 63,000 Facebook followers, 58,000 Twitter followers, 35,000 Arkansas blog followers, and 70,000 daily email blasts, all of whom value our commitment to holding the powerful accountable. But we need your help to do even more. By subscribing or donating, you'll not only have access to all of our articles, but you'll also be supporting our efforts to hire more writers and expand our coverage. Join us in the fight for truth by subscribing or donating to the Arkansas Times today.

Previous article Little Rock Margarita Festival is coming May 4 Next article Café 501 pleases the palate