Arkansas cracks down on online payday lenders, consumer choice
Payday lending has been outlawed in Arkansas since 2009, but that hasn’t stopped some consumers in need from looking to online payday loans funded from outside the state. Unfortunately, freedom of choice isn’t viewed kindly by Arkansas Attorney General Dustin McDaniel, reports the Arkansas News. McDaniel’s office obtained court orders barring two online payday lenders from issuing loans to Arkansas residents.
Arkansas has a 17 percent APR cap
Payday lending laws in Arkansas specify that interest be capped at 17 percent APR, a far from tenable rate, as numerous independent studies have shown. The online payday loans in question charged 300 percent APR, which is not out of the question in the industry, although the numbers are deceiving because the loans are not 12-month loans.
Kansas-based companies Geneva-Roth Capital and Geneva-Roth Ventures, which do business online under the banner of Loanpointsusa.com, were named in one judgment. The companies agreed to stop issuing payday loans to Arkansas residents, cancel about 700 pre-existing loans in the state, give up more than $700,000 in claims and pay the State of Arkansas $60,000 in legal fees.
The second judgment, against Kansas-based Arrowhead Investments (which also transacts as Galaxy Marketing), forced the company to stop issuing Arkansas payday loans, abandon $44,370 in claims against 162 Arkansas residents and pay the state $30,000.
All payday lenders involved were required to withdraw negative credit marks against any Arkansas borrowers.
Legislating against the people
Regarding payday loan laws in Arkansas, one might wonder why it was deemed necessary in the first place to restrict consumer choice. While they didn’t have payday loans specifically in mind, two very famous men had poignant things to say about unjust laws. Indian independence leader Mohandas Gandhi once said that “An unjust law is itself a species of violence,” while U.S. civil rights figure Martin Luther King, Jr. said that “An individual who breaks a law that conscience tells him is unjust … is in reality expressing the highest respect for the law.”
While the two men were not addressing the concept of payday loans specifically, their message is clear. Unjust laws can be injurious. The conflict exists between federal and state law, as payday loans are a legal consumer finance product on the national level. The same holds true for most states, which makes one wonder why Arkansas consumers need such protective guidance from their nanny government.