Is the payday lending practice of extending short term financing at high APR legal in Arkansas? Since 2008 payday lending has been eliminated in Arkansas. The prohibition came to action due to the efforts put in by The Attorney General’s office of Arkansas.
Each state issues different laws when it comes to payday lending. Despite the fact that payday loans are illegal in Arkansas, some lenders are practicing payday lending overlooking laws. This type of lenders is the most dangerous and could be predatory in nature. As a borrower you must try to stay away from these lenders.
Payday lending in Arkansas-
All storefront payday loan operations have been shut down in Arkansas. But despite all efforts of the Attorney General’s office, restrictions cannot be laid on all usurious loans. High rated online payday loans are still operating in this state.
The roll over feature of online payday loans directs the most. It is calculated based on the amount that is to be paid for loan fees without reducing the amount that is borrowed. Payday loan operations remained banned unless payday lenders agree to offer loans with 17% usury cap.
You must know that Arkansas is the only state in the U.S which has a usury limit written into its constitution. According to Arkansas courts, illegal lending by payday lenders is basically offering excessively high rates which are above legally allowable rates.
Interest rates charged for consumer loans in Arkansas are capped at 17% APR. The reason why payday loans are prohibited in Arkansas is because the price of payday loans is considered to be high as per the Government. Moreover, the state laws don’t support predatory lending practices.
Payday lending has been banned in Arkansas since 2011. During that time the Check Casher Act was passed. Also, the 17% APR cap was set from that time. This laid to discontinuation of lending services by payday lenders as lending became a not profitable service.
Despite various laws implemented by the Government, there are banks and online lending companies which offer cash advances which are almost like small term loans. This type of financial help is provided to help customers during unexpected emergencies.
In Arkansas, payday lenders are not allowed to operate because of the rate cap set by the authorities. But definitely there are other options available in Arkansas which you can compare and evaluate. In short, loans should be your last resort if you fail to succeed in spotting needed financing options.
Past phase of payday lending in Arkansas-
The Check Casher Act passed in 1999 was meant to license and regulate cash checking and payday lending businesses. But the reality was totally different. Instead of controlling high cost payday lending, this controversial regulation supported usurious payday lending practices in Arkansas.
In the 2000s a scheme named Rent-A-Bank came into action and became popular throughout the nation. However, this also turned out to be the same as it was also supporting usurious lending practices in Arkansas. Later in 2007 this was eradicated by the Federal Deposit Insurance Corporation.
Before 2006 Advance America scheme was made available in the payday loan market for the military. Soon it was withdrawn and the Military Lending Act came into practice. According to this act payday loans offered to the military should be capped at 36% APR.
Then, in 2008 the Arkansas Supreme Court declared that The Check Casher Act was illegal under the state’s constitution. This resulted in the elimination of the payday loan industry from Arkansas. The phase between 2008 and 2009 saw further actions taken against illegal brokers.
It was recorded that 11th August 2009 the last payday lending business happened in Arkansas. Although payday lending is officially prohibited, national banks continued offering loans in the form of advances. These banks offer financing with 70-80% APR as 17% usury cap does not apply to them.
Alternatives to payday loans-
In Arkansas when you need cash assistance instead of reaching out to a payday loan consider shopping around for a better alternative option. If asking a family member or friend is convenient for you then do it without any hesitation. In some cases, you can even reach out to your creditors and ask for extension of due dates.
If there is no other way for you to manage cash, you can sell some of your important things online or via a thrift store. Selling valuable stuff is also possible at a pawn shop. It would be better to prefer getting financial help from a bank or credit union. Besides, adding an extra source of income can help you manage additional financing during those trying times.
Arkansas state government assistance programs like the Home Energy Assistance Program or Food Stamp Program etc are available. You can get benefitted from these programs simply by qualifying for one. Opt for these options after keeping your requirements in mind.
On a different note, you can also apply for Arkansas Tribal loans. There are some payday and title lenders who need not have to comply with state laws. These lenders work according to tribal sovereignty.
Tribal lenders can charge high fees and interest rates which are prohibited in the state of Arkansas. So, these lenders can overlook interest caps and limits decided by the state government. It is because these lenders are not bound to follow rules set by the government.
Before you proceed further and agree to a loan, make sure to check if the lender has a valid state license of the state. Don’t forget to check the website of the lender. Evaluate the physical address of the lender mentioned in the website to confirm if the lender is legitimate or not.
Filing a complaint-
You can file a complaint online. All you need to do is to fill and submit the online complaint form to the Consumer Protection Division. The different types of consumer complaint topics are fraud and threat, not existing debt, charges from account, not requested loan, lender is not available, loan to return, credit rating, loan not received etc. Be aware of your rights under the Fair Debt Collection Practices Act.