Tuesday, March 15, 2011

EDITORIAL >> Loan sharks not gone yet

You remember the painfully long (10-year) battle to stop the payday lenders from squeezing the last drop of blood out of the poor and desperate? The Arkansas Supreme Court struck down the Arkansas Check Cashers Act of 1999 only two years ago, although everyone had known that it was unconstitutional from the day the legislature passed it.

The installment lending industry, as it calls itself, was back at the legislature, this time with three pieces of legislation to sharply raise the permissible interest rate on small loans to poor people to highway robbery again. Rep. John Woods, Republican of Springdale, was the sponsor of one of them, and it sailed out of the House Insurance and Commerce Committee last week. It would allow loans of $250 to $5,000 to be made for terms of up to 48 months and it would allow all kinds of special charges that would not be characterized as interest, although the Supreme Court has said over and over and over that all those ruses would not work. They are interest.

Before they went out of business after the last Supreme Court ruling, the usurers were charging people up to 400 percent interest. People were trapped in an unending cycle of debt. Those storefront lenders were all over the state, including Jacksonville, Sherwood, Cabot and beyond. There were more payday lenders in Arkansas than McDonald’s.

Arkansas voters were lulled into voting for a constitutional amendment in November to lift the interest-rate ceiling. It allows the legislature to establish the maximum interest rate by a three-fourths vote of each house. Now we know whom it was for: the payday lenders. Separate from Woods’ bill, two bills were introduced to lift the interest-rate ceiling again to highway robbery. The protest from the American Association of Retired Persons and other groups seems to have stymied that move.

Yesterday, the lending-industry lobbyists had those bills pulled. They will wait for a better day to get the interest ceilings restored to loan-shark levels.

But their bill to allow lenders to charge a big array of fees and say that the fees cannot be counted as interest is still moving along. It is another way to permit the exorbitant charges that the Supreme Court said were illegal.

If it passes, there will have to be still another lawsuit, which will give the lenders a few years to feed on the misfortunes of the poor and desperate before the courts finally shut the door again. There ought to be a better way.