Black Friday isn’t what it used to be, but the arrival of the spending season prompts concern about a looming threat to Arkansas consumers: the return of the illegal loan sharks euphemistically known as payday lenders.
Arkansas voters have repeatedly adopted strict usury limits, the current maximum being 17 percent APR. And while it took entirely too long, the Arkansas Supreme Court has also spoken: Predatory lenders can’t circumvent that limit merely by calling the cost of borrowing a fee rather than interest.
This is an Opinion
Our former attorney general, Dustin McDaniel, aggressively enforced the usury law. But this year, one payday lender has challenged the law, so far with impunity.
CashMax Loan Services opened a storefront in North Little Rock and, in the absence of any action by AG Leslie Rutledge, opened another one in Hope.
CashMax is using a slight variation on the old business plan and, singing the old predatory lender song, claims that various charges and fees are not actually interest under Arkansas law. But it acknowledges that the federal Truth in Lending Act does require it to calculate the annual percentage rate on its typical loans as 260 percent or more.
McDaniel is a Democrat and Rutledge a Republican, but protecting consumers from predatory lenders is not a partisan issue. South Dakota voters, who favored Donald Trump even more heavily than Arkansans, used the same ballot this month to impose a usury cap, and the vote to kill off the payday lending industry in their state was 3 to 1.
CashMax is the proverbial camel’s nose under the tent. If it can get away with charging vulnerable Arkansans a true interest rate in the hundreds, the scourge that took a decade to drive from our state will be back — first as a trickle, then as a flood.