19 March 2008
For which I will gladly pay you Tuesday
Arkansas Attorney General Dustin McDaniel is lowering the boom on the payday-loan industry:
McDaniel said he sent letters to about 60 companies running 156 payday lending outlets in Arkansas, telling them to cease and desist their practices.
The attorney general said he made the demand on the basis of two recent opinions from the state Supreme Court finding the high interest rates payday lenders' charge on short-term loans "unconscionable" and deceptive trade practices prohibited by the Arkansas Deceptive Trade Practices Act.
This could be arguable. On the one hand, Arkansas' usury law limits interest rates to 17 percent. But the 1999 act that first allowed check-cashing centers states that their charges for holding a post-dated check does not qualify as interest. In January, the Court ruled that the state's check-cashing act does not confer "blanket protection" on lenders.
One trick of the trade: partnering with out-of-state banks [link goes to PDF file] which are allowed to charge more than the Arkansas rate if their home state permits.
AG McDaniel says he requested written responses from the lenders no later than the 4th of April.
Posted at 11:42 AM to Common Cents
These payday loan places (and their cousin, the "cash against your car title" folks) have a place, sometimes if you need just a spot fix and can pay it off with in a week, you might do it. On the other hand relying on this kind of lending to get you through from pay check to pay check, runs the risk of getting you right to the edge of the abyss.
Funny thing is, they all remind me of the old *slush funds* we used to have in the military. Would charge say 20 bucks for you to have 100 bucks til next payday. the monies made on these transactions went towards pick nicks, and other forms of recreation for the group which handled the funds (a coffee mess, or senior enlisted mess). Sadly, most have gone the way of the dodo, due to a few which were run by less then honest folks. Or because of the whiners out there who felt they shouldn't be charged "interest" for using other peoples monies. We also used to give cash with no charge to those fellow shipmates going home on emergency leave, just pay it back when you get squared away. Yep, we sure were evil capitalists.
In one way, anyway, this reminds me of the subprime-mortgage debacle: the banking industry has long been under pressure from the government, under the influence of activist groups, to extend services to clients it thinks of as weak or risky, and now that the services exist well, look at the results.
You are correct. And now the tax paying public (and corporate ... err wait, they will just pass it on to us) well bear the brunt of this in the form of one tax increase or another. Wither it is quick and easy loans or the government forcing monies/properties to flow to the masses, doesn't anyone realize anymore, there ain't no such thing as a free lunch?