The Associated Press is reporting that Arkansas Attorney General Dustin McDaniel has filed four lawsuits against payday lenders that he says are violating the state’s constitution by charging high-interest loans.

Car repo men and pawnshops booming in Arkansas and expected to grow in the wake of payday lending stores closing.   From the piece:

People pawn golf clubs, CDs, tools, and a big trader is gold jewelry. At nearly $1,000 an ounce, it’s hitting record levels.You know you can’t go to a bank and get a $25 loan to pay your gas bill,” says Pakis. “We are here for people that don’t necessarily have a credit card. We can always help out people.”

Pakis says with the slow economy and Arkansas payday lenders forced to shut down, that he expects business to double by the end of summer.

 

A consumer group has weighed in on the Arkansas payday loan debate saying this:

With the apparent success of his intimidation tactics, McDaniel joins the list of meddling elitists who couldn’t care less about soaring food prices. And the 500-plus employees of payday loan companies in Arkansas will join 80,000 other Americans at the back of the unemployment line.

The Arkansas Business Journal picks up on an Associated Press story that analyzes how we got to this point in Arkansas.  This paragraph gets to the heart of the matter:

“The 1999 law {the Check Cashers Act} declared that income earned by payday lenders was a fee and not interest, avoiding the 17 percent limit on interest set out in the Arkansas Constitution. The Supreme Court in 2001 ruled that the Legislature had no power to determine what is or isn’t interest, but the court didn’t rule on the constitutionality of the act.”   

The article goes on to say that the Arkansas State Board of Collection Agencies will continue to issue licenses to payday lenders. 

So says Tim Miller of Center for Consumer Freedom in today’s Baxter Bulletin out of Arkansas.  Money quote:

“Borrowers are best served when they have more choices to pick from, not when politicians eliminate what is for many their only option.”   

The Payday Pundit has been making this point over and over.  Payday loans are an option for consumers facing unexpected expenses.   The payday lending industry has always said that  competition is the best way to keep costs down.  

The free market  consumer group–Consumer Freedom–has this to say about the situation in Arkansas:

{The} announcement on Tuesday that most payday lending companies have caved is bad news for consumers who can’t get a loan but would prefer not to pawn their television or bounce a check.

You can read the rest here.

This article says some Arkansas payday lenders have tweaked their business model to operate under different regualtions.  From the article:

“One model involves cashing checks and charging membership fees,” Allen said. “It’s only limited by a person’s creativity. 

“The idea is for them to separate as much as possible the interest from the loan,” Allen said.

The entire article can be read here.

The AG is threatening payday loan companies trying to collect on old loans, even those that say they are shutting down.

This could be a record.  The Payday Pundit is posting TWO fair and balanced stories in a row.  This one out of the Morning News in Northwest Arkansas carries the amazing headline: “Banning Payday Lending May Hurt Some.”   No kidding.

And the reporter, John Henley Jr. actually talked a customer and described his situation:

He has worked for the same company for 14 years and has a checking account, but a two-year dispute with his insurance company ruined his credit and payday loans kept food on his family’s table through February and March.

Kudos to Mr. Henley and the Morning News for looking at the customer perspective and publishing a fair story.

The Motley Fool, which periodically comments on happenings in the payday lending industry, has this to say about recent developments in Arkansas.   There are still some sensible observers out there. 

“Arkansas’s attorney general wants to shut down payday lenders in his state, and he’s sent letters to some 60 companies doing business there, telling them to pack up, ship out, and — oh yeah! — forgive all the debts of the people who borrowed money from them…For individuals needing small bridge loans — well, tough luck! You can’t have one.