Payday Loan Times

Hey, did you hear that Advance America will be pulling out of Arkansas? Attorney Todd Turner did - and he coudn’t be happier about the news.

The company,which has 30 check-cashing centers in Arkansas and more than 2,600 nationwide, announced this week that the company will no longer be able to make payday loans through First Fidelity Bank of Burke, S.D.

Turner has filed several lawsuits against payday lenders on behalf of persons who have been charged more than 300 percent interest on loans. He’s won every suit, but neither he nor his clients have ever collected on those judgments because the companies either declare bankruptcy or cease operation in the state.

He and two of his clients testified before the Arkansas Senate’s Judiciary Committee last week. One of the clients told senators that she ended up paying more than $1,400 for a $500 check. Plus, the payday lenders are not always friendly, she said.

“They’ll threaten to take the check to the prosecutor and have you arrested for writing a hot check,” Turner said.

Most prosecutors in the state will not handle payday lending checks as a hot check, Turner said.

A former deputy prosecutor, Turner said the prosecutors consider them promissory notes rather than hot checks. The quick payday advance lenders can go after their clients for civil penalties, but not have them charged with a criminal offense.

“They (the lenders) prey on the uninformed and uneducated,” Turner said.

Besides taking advantage of his clients, Turner maintains that payday lenders are violating Arkansas law.

“Arkansas is the only state in the country that has a Constitutional amendment limiting interest to 17 percent,” Turner said. By charging their customers more than 300 percent interest, the lenders are violating the state’s Constitution.

A consumer group, Arkansans Against Abusive Payday Lending, points to the harm the payday lenders cause a community by targeting the uneducated or poor. Turner agrees with them, but that is not his cause. “Whether you think the practice is good or bad. It’s against the law,” he said.

In 1999, the Arkansas legislature passed a bill allowing the check cashers to operate as long as the fees are not called “interest.” Turner said it doesn’t matter what the companies call the amount charged, “it’s still interest.”

The bill also provided a method for the check cashing companies to register with the State Board of Collection Agencies and requires companies have liquid assets of at least $20,000 for each location and post a $50,000 bond to the state. Research by the AAAPL indicates that only 136 of the 275 payday lenders in the state are registered.

Lawmakers may address the situation again in the next legislative session, Turner said. State Sen. Tim Wooldridge and state Rep. Jay Martin have authored a bill that will criminalize triple digit interest. If passed, legislators will either have to repeal the 1999 law or ask voters to amend the state’s Constitution to allow higher interest rates to be charged on all loans.