On Wednesday, Arkansans Against Abusive Payday Lending (AAAPL) released an updated study of payday lending in Arkansas that shows about half of the state’s 265 payday advance loan lenders are still not being regulated by the state.
Since an earlier survey was released in March, the state agency charged with regulating payday lenders, the Arkansas State Board of Collection Agencies, has taken some steps toward better licensing and stricter regulation, AAAPL said.
The latest data shows that 55 percent, or 146, of the state’s 265 payday cash loan lenders are now licensed and regulated by this state agency to make payday loans.
That leaves 45 percent unregulated, the report said.
Of those, the report said 38 percent, while licensed by the state, are not regulated and are allowed to make cash loans that don’t comply with the state board’s own regulations. Another 7 percent are neither licensed nor regulated by the state.
“Recent actions taken by the ASBCA represent a step in the right direction in favor of Arkansas consumers,” said H. C. “Hank” Klein, founder and president of AAAPL. “However, a regulation rate of 55 percent would still get an ‘F’ on any academic grading scale. While progress has been made, much more remains to be done.
No payday lender in Arkansas should be allowed to operate without both a license to make payday loans and meaningful regulation by the [state board].”
Among the state board regulations the report says lenders aren’t following:
- Customers having more than one check held by the same payday lender at a time
- Lenders making faxless payday loans in amounts greater than $400
- Loan terms longer than 31 days; and lenders not issuing loans in cash.
Quick payday loan lending in Arkansas has been the subject of constant litigation since the General Assembly adopted the Check Cashers Act of 1999.
The Supreme Court voided part of that law in 2001 in a case styled Luebbers v. Money Store Inc. but has not directly ruled on the question of whether the fees charged by payday lenders are tantamount to interest in excess of the constitutional limit, as argued by opponents of the short-term lending practice. If the fees are calculated as interest, the rates routinely exceed 300 percent.