Sunday, April 9, 2006

The Arkansas legislature may not be prepared to fully eliminate payday loans from the state yet, but Republican gubernatorial candidate Asa Hutchinson said last week that he would lead efforts to repeal Arkansas’ payday lending law if elected the state chief executive.

In 1999, the Check Cashiers Act opened the door for predatory payday loan lending practices in Arkansas to grow, Hutchinson told senior citizens in a speech to a local AARP group.

“It’s past time for somebody to step up and do away with this exploitative practice,” he said. “Predatory payday lending is a trap for the unwary that becomes a financial ball and chain around the necks of our working families and our most vulnerable citizens.”

The AARP and other payday loan lending opponents say current law allows payday advance companies to circumvent the state constitution’s 17 percent interest limit and charge more than 400 percent interest on loans, costing the average payday loan borrower $800 for a $350 loan.

Industry supporters counter by saying that payday lending provides banking alternatives for people who have little access to traditional lending institutions.

Hutchinson’s stance comes two weeks after the state Republican party adopted its “Blueprint for Reform” party platform, which proposes to end payday lending business altogether. A step was taken in this direction recently when Advance America pulled out of the state.

Hutchinson, a former congressman and federal Department of Homeland Security undersecretary, faces Democrat Mike Beebe, the state attorney general, in the Nov. 7 general election.

Beebe spokesman Zac Wright said eliminating lenders of payday loans is not a new issue for the attorney general, who voted as a state senator in 2001 to repeal the 1999 law.

“He’s taken action. He voted to repeal the law five years ago. He would get rid of it as governor. This is not a new position for him,” Wright said. “As governor, he’d go a step further because repealing it is not enough. He’d support legislation specifically targeted at curbing the practice.”

The gubernatorial candidates join a long list of candidates for statewide office that have proposed plans to amend or abolish the 1999 act, or to enforce provisions in the state constitution that limit usurious transactions and cash advances completely.

Besides pushing to repeal the law, Hutchinson also would propose fining payday loan lenders who charge more than constitutionally established 17 percent annual interest rate for payday advances.

State Sen. Tracy Steele, D-North Little Rock, has drafted legislation for the 2007 regular session that would amend the act. He also sponsored one of two bills to abolish the law in the 2005 regular session. Both measures failed.

Also, Rep. Jay Martin, D-Little Rock, and Sen. Tim Wooldridge, D-Paragould, both lieutenant governor candidates, are promoting a bill that would enforce a provision in the state constitution that would make any usurious transaction illegal.

Some lawmakers criticized the proposal at a recent legislative committee because it exempts banks, credit unions and savings and loans that charge high fees for bounced checks from any enforcement actions.

Candidates for attorney general also have taken up the payday loan lending issue.

Democrat Robert Herzfeld announced a plan several weeks ago that he said would “close loopholes” in current law. Republican Gunner DeLay also released a plan earlier this year, but Herzfeld, the Saline County prosecutor, criticized DeLay for voting for the 1999 act and later voting twice not to repeal it while he was in the state Senate. DeLay accused Herzfeld of running a “me too” campaign.

The issue of instant payday loans in Arkansas doesn’t appear to be going away any time soon.

This entry was posted on Sunday, April 9th, 2006 at 8:27 am and is filed under Arkansas.