Payday lender packs it in
Posted on Monday, October 6, 2008
Advance America, the largest payday loan provider in Arkansas, announced Tuesday it will close stores in the state because of Attorney General Dustin McDaniel's threat of lawsuits over highinterest loans.
This is the result of Mc-Daniel's efforts that began back in the spring to shut down payday lending companies in the state. Advance America worked out a deal with McDaniel that it would close stores and stop issuing loans if no further lawsuits would be filed against the company.
As was the case when news of the clampdown on payday lenders first broke, we still wondered whether it is necessary for state government to intervene on behalf of folks who knowingly walk into these businesses and enter into high-interest loan agreements.
McDaniel's argument is that the fees payday lenders charge harm the working poor and violate the state constitution's ban on high-interest loans. The lenders say they are operating under licenses issued by the state and provide a service for people short on cash.
According to the state constitution, no one should charge an interest rate higher than 17 percent. But the state Check Cashers Act that allows payday lenders to operate says a fee paid for holding a check written before the date it is to be cashed "shall not be deemed interest. "The conditions of payday loans may be known up front, but typically only people in desperate circumstances would enter into such an agreement. The huge fees only create long-term problems for people seeking short-term solutions. Again, people know this upfront, but it doesn't make the exploitation of them and their circumstances right. That's why we have difficulty mustering sympathy for the closing of these payday lenders. They obviously see the writing on the wall or they wouldn't be cutting a deal and closing shop. On the flip side, McDaniel may be protecting the public against predators, but what are poor people who need emergency cash supposed to do ? Can poor people walk down to the bank for a shortterm, $ 500 loan ? Of course not. We're talking about bailing out Wall Street to the tune of $ 700 billion, but if some poor fellow needs a paycheck advance to get his car fixed, it's not going to happen. Tack that $ 700 billion on to the billions in tax dollars being spent on all sorts of frivolous projects and questionable aid programs both foreign and domestic and we suppose that the signs payday lending firms post telling you the terms upfront, don't sound so dishonest.
- El Dorado News-Times
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