State Courts Declare Payday Lenders Usurious
by January 8, 2001 12:00 am 109 views
Thousands of Arkansans are unaware that they may be living in a day of jubilee and that a portion of their debts has been canceled.
rArkansas judges throughout the state are declaring check-cashing agreements invalid. The rulings are leaving payday lenders no legal recourse for collecting on contracts that judges effectively have labeled void.
rAt the core of the dispute is whether the fee charged by payday lenders is actually interest and whether what they call accounts receivable are actually illegal loans.
rThe decisions affect the nearly 400 “payday advance” businesses in Arkansas and a conservatively estimated 43,600 customers who owe them money.
rHow much money? At least $12 million, according to Bob Srygley, a board member of the Arkansas Check Cashers Association. He and his peers are fighting to keep payday lending — which the industry prefers to call “deferred presentment” — from being formally outlawed in Arkansas.
r”We’re going to try to keep that from happening, of course, and continue to provide the service we’re providing to the public,” said Srygley, a Monticello businessman who owns a dozen check-cashing outlets around the state.
rThat effort would appear to be an uphill battle, given the growing number of court rulings around Arkansas. Some legal observers have concluded that the only effective way to gain true legitimacy would be to alter the state’s usury law.
rAnd that would require a task few would relish: amending the Arkansas Constitution.
rThe number of successful lawsuits against payday lenders is growing as customers invoke the 125-year-old usury statute and judges concur that the fees charged are interest typically calculated in triple digits.
rFor the complete story, go to the Arkansas Business section.