Payday Loan Lender Punishment Lauded by Consumer Group
By J.J. CameronPayday Loan Writer
As previously reported, an Arkansas payday loan lender was recently fined $1.3 million for shady practices. In response, a member of that state’s lending advocacy group said the punishment was a “big step in the right direction.”
Last Wednesday,, the Arkansas State Board of Collection Agencies closed the final fast cash advance store run by Dennis Bailey, who had been operating 14 payday loan businesses in Arkansas.
As a result of the board’s order, customers of Bailey’s stores in Arkansas are not obligated to repay their outstanding payday loans.
“Up until now, the state has not been enforcing the law,” said Matt Price, chairman of Arkansans Against Abusive Payday Lending, a coalition that works to rid the state of abusive payday lending.
The AAAPL, along with other consumer advocate groups, work to discourage consumers from using payday advance loan companies because of high fees and lack of state regulation.
Many payday loan companies with license permits are not regulated by the agency because of an interpretation of the 1999 Check Cashers Act, leaving some businesses to evade the law that limits interest to 17 percent annually, according to the AAAPL.
Proponents of the payday loan lending business say cash advance companies provide a needed service for those who need money immediately. This is considered a short-term financial solution to make ends meet for their customers, according to the Advance America Cash Advance Web site.
Although state law limits interest on consumer loans to 17 percent, often companies that specialize in payday advances impose an annual percentage rate of more than 500 percent, Price said. Repeatedly rolling over cash advances could then lead consumers into a cycle of debt.
Arkansas law states that a payday loan may not exceed $400 and can only be rolled over three times. But some companies provide as much as $1,000 and roll over for more than one year. It can be a serious problem.
A February study by AAAPL showed less than half of payday lenders operating in Arkansas are licensed with ASBCA. As a result, the coalition is asking professionals to use a state-contracted database to enforce limits on no faxing payday loans and to provide industrywide data to the regulators and the public.
AAAPL also wants to bar payday advance lenders from making consumer loans with interest rates of more than 17 percent annually and require all payday lenders in the state to be licensed and regulated by the ASBCA. Consumer advocates say customers would be better served by finding a different way for getting a short-term loan, such as borrowing from family members or using a cash advance on a credit card.
