Wednesday, March 08, 2006

SAT 3-8-6 EDITORIAL >> Beebe sues payday lenders

Hats off to Attorney General Mike Beebe, who asked a circuit court this week to close a hybrid check-cashing business at Jonesboro that is charging up to 520 percent interest. Money in a is a particularly blatant scam so the attorney general and Democratic candidate for governor feels secure in going after one of its outlets.

Money in a does make loans, you see, so it claims that the law limiting interest rate charges does not apply to it. So 520 percent interest does not mean anything. Money in a contracts with consumers for internet service and charges an annual fee. It “rebates” money to the consumers up front and they pay it back all year. For example, it may “rebate” someone $300 and then over the next year they pay the company biweekly, up to $1,500 over a year. Beebe’s suit maintains that the rebate is a ruse. It’s really a loan to a desperate person, who winds up paying it back five times over in a year.
Of course it is a loan and of course it is illegal.

But Money in a is worse only by degrees than scores of other check-cashing companies that charge interest rates many times the lawful limit by disguising interest as something else. Beebe and his predecessor, Mark Pryor, never went after them.

For 50 years, lenders, including big banks and merchants, could not get by with such schemes. They couldn’t fudge even slightly.

The Arkansas Supreme Court interpreted the usury provision in the Constitution to mean what it said and tolerated no nonsense. The law was weakened a bit and the courts have become a trifle more pliant. But in the end, this year perhaps, we trust that the justices will give consumers some justice and hold these payday-lending schemes, all of them, to be beyond the pale.

Meantime, please extend medium-sized congratulations to General Beebe.