Leader Blues

Friday, December 26, 2008

TOP STORY > >So long to area payday lenders

By JOHN HOFHEIMER
Leader senior staff writer

As of the first of the year, Jacksonville will have only one remaining payday lender as such businesses shutter their doors or pull up stakes.

Payday lenders typically make small loans, perhaps $300 for a fee of $50, but on an annualized basis, such interest is more than 300 percent, far in excess of the state’s usury cap of 17 percent.

Borrowers can get caught in a cycle of debt, able to pay off old loans only by taking out new ones.

It’s too bad for the lenders, who would no doubt have been reaping a windfall Christmas bonanza in the face of a shrinking economy, but it’s great news for the consumer, who must now find alternatives to such predatory lenders and will avoid the debt trap they represent, according to Hank Klein, founder of Arkansans Against Abusive Payday Lenders.

On Dec. 3, Peggy Matson, director of the regulating agency, sent a letter to all remaining licensed payday lenders notifying them that the Arkansas Supreme Court had found the so-called Check Casher’s Act unconstitutional. She ordered them to return their licenses and released them from the necessity of keeping a $20,000 per store bond in the bank, Klein said.

“I’m feeling great,” Klein said, “Feeling ecstatic.”

“I always felt it was unconstitutional and the court affirmed that belief Feb. 6.”

As for the remaining payday lenders, Klein said, (the attorney general) has made it very clear he wants to drive every one of them out of the state.

At the beginning of the year, there were 275 payday lenders operating in the state. After the Attorney General’s Office sent cease-and desist-orders to many of them, that number fell to 139 and then to 80, according to Klein, a consumer activist who turned his focus on payday predatory lenders in the state.

That’s because the state attorney general’s office, the state Supreme Court, the military, the Federal Insurance Deposit Corporation and even the once-disinterested regulator of payday lenders have piled setback after setback on the companies.

This time last year Jacksonville had five such lenders, but three shut down this fall alone, two of those since the beginning of the month.

The only remaining payday lender in Jacksonville is First American Cash Advance, located on Loop Road next to the Subway shop.

There also is a check-cashing-only shop on Main Street between Double R Florist and Subway.

Payday lenders also have closed or are closing in Sherwood, Cabot and Lonoke.

C. Cosby Hodges had two stores remaining in Jacksonville, but they stopped initiating new loans in late December and remain open until the first of the year only to collect on loans already out.

“As far as I know, my stores in Jacksonville are still open.Check with me after Christmas,” Hodges said in a voice-mail response Tuesday.

Hodges of Fort Smith, and his partner, Robert Srygley of Fayetteville own 53 such stores in Arkansas, which they claim to operate under a South Dakota charter and are thus not subject to the Arkansas interest limitations.

If they are in fact closing all 53, that would leave only 27 payday stores in the state, Klein said.

First American Cash Advance, a Delaware corporation, owns the other 27 stores.

On Dec. 3, Matson, director of the state Board of Collection Agencies—the governing agency for payday lenders—sent a letter to all remaining licensed payday lenders notifying them that the Supreme Court had found the so-called check-casher’s act unconstitutional.

She ordered them to return their licenses and released them from the necessity of keeping $20,000 per store in the bank, Klein said.

There are still about 45 check- cashing stores around the state.