Wednesday, March 1, 2006

The office of the Arkansas Attorney General is suing a Jonesboro, Ark., payday loan business and asking a judge to shut down the operation for charging interest rates as high as 520 percent.

The Arkansas News Bureau reports that lawsuit, filed Tuesday in Pulaski County Circuit Court, accuses Money In A Flash of charging “unconscionable and unlawful interest rates. It alleges that the owners of the business entered into contracts with consumers for loans with exorbitant and illegal interest rates.

The terms of the contracts allowed consumers to receive up-front payday advance loans disguised as “rebates” from the company, according to the lawsuit, and allegedly required them to make monthly or biweekly payments of up to $60 to the company — which translates to APRs of more than 500 percent.

Attorney General Mike Beebe called the practice “an especially egregious example of a company using deceptive practices to take advantage of consumers through illegal high-interest rates” in a written statement.

He added that the company “not only charged outlandish interest rates to customers who received these ‘rebates’, but withdrew money directly from bank accounts if they did not pay in cash on schedule.”

Money In A Flash is also accused of charging an additional one-third of the rebate to consumers who try to terminate the one-year contract before it ends, according to the suit.

H.C. “Hank” Klein, founder of Arkansans Against Abusive Payday Lending, welcomed the legal action.

“They’re pretending these are not loans. The check cashiers law of 1999 says there are no rollovers. Instead the customers must contract to pay them $60 every two weeks,” Klein said of the payday advances.

The A.G.’s office asked Judge Tim Fox for to stop the company from making the loans by issuing an injunction, and is seeking restitution for consumers as well as civil penalties of $10,000. The suit also asks that the judge revoke the company’s right to do business in Arkansas. Owners Dwight Blake, Elaine Blake, Robert Blake and Yvonne C. Clark are named as defendants.

In addition to the Jonesboro stores, the four own 10 other payday loan establishments in the state. Only the Jonesboro operation is a target of this investigation, for now, but that may change if similar allegations surface elsewhere in the Natural State. It appears the anti- Arkansas payday loan efforts of the A.G.’s office may be just getting underway.

This entry was posted on Wednesday, March 1st, 2006 at 4:41 pm and is filed under Arkansas.