A bill that would tighten some rules on Arkansas payday loan lenders won the support of a Senate committee Tuesday. But the measure is a weaker version of a bill that had failed earlier.
The bill, by Democratic Senator Terry Smith of Hot Springs, allows those seeking payday cash loans to rescind the checks within a day and says no check-casher can seek a criminal “hot check” charge against a client for extending a loan. The bill also allows for the state Board of Collection Agencies to go after check cashers breaking the state’s laws.
However, the bill does not require check cashers to comply with the 17% usury limit set in the state constitution.
A House bill requiring that was previously voted down by the Senate Insurance and Commerce Committee.
Smith’s bill, which he described as a compromise providing some oversight of the cash advance payday loan industry, now heads to the Senate floor.
A customer making a $350 savings account payday loan in Arkansas would write the check-cashing company a check for $400. The lender would keep the check for about two weeks without cashing it, allowing the customer time to buy back the check.
The $50 charge on the $350 loan for 14 days is the equivalent of 371% annual interest. That is well above Arkansas’ usury limit of 17% per year. The bill does not require compliance with the 17% limit.