UPDATED: AG McDaniel Orders Payday Lenders to Cease Operations or Face Action

by George Waldon  on Tuesday, Mar. 18, 2008 9:49 am  

The state attorney general's office on Tuesday mailed letters to 156 businesses around Arkansas ordering them to cease and desist payday lending activity.

"I am demanding that these payday lenders close their doors permanently," said Attorney General Dustin McDaniel, who announced the action at a press conference Tuesday morning.

The letter also demands that the businesses void current and past-due payday loans, end collection activities on payday loans and stop making any new payday loans.

"Be forewarned that your failure to comply with this demand will likely lead to litigation to enforce the laws of Arkansas," the letter states.

"We are prepared to take them to court," McDaniel said.

Payday lenders were given an April 4 deadline to respond in writing to the attorney general's letter. The letters were mailed to all known payday lenders licensed by the state board of collection agencies

"If you violate the laws and constitution of this state, it doesn't matter if you have a license hanging on your wall," McDaniel said.

After coming under fire from consumer groups, payday lenders successfully helped create the Arkansas Check-Cashers Act of 1999 that legitimized a business previously considered a blatant violation of the state's constitutional limit on usury.

The Arkansas Supreme Court subsequently struck part of the law as unconstitutional, and circuit courts around the state have repeatedly found that the "fees" charged for short-term loans were tantamount to usurious interest of 300 percent or more.

"Payday lending is not a new issue for this office," McDaniel said.

Former Attorney General Winston Bryant began steps to curb payday lending during his tenure. But the AG's office adopted a passive stance under his successor and now U.S. senator, Mark Pryor, who had accepted campaign contributions from payday lenders.

The attorney general's office took minor steps against payday lenders under Pryor's successor, Mike Beebe, who is now governor.

 

 

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