HB1036: closing the loophole on payday lenders

The bill that places an enforcement mechanism on the Arkansas usury law is on next Wednesday's House Insurance & Commerce committee agenda. Amendment 60 of the Arkansas Constitution (passed by Arkansas voters in 1982) states that "all contracts for consumer loans having a rate of interest greater than 17% per annum shall be void as to principal and interest."

Individuals who borrow money from these payday lenders typically pay "fees" (read "interest") equivalent to an APR of 372% to 869%. HB1036 would stop this practice by fining the offender $300 per violation. Opponents of the bill state that check cashing organizations do serve a market and can't operate on 17% loans. It will be a controversial measure, but I'm glad to be a co-sponsor on this legislation.