LITTLE ROCK — Legislation pending in Congress would allow payday lenders to return to Arkansas offering triple-digit loans under federal authority, Attorney General Dustin McDaniel said Friday.
McDaniel joined 39 other state attorneys general in opposition to H.R. 6139, known as the Consumer Credit Access, Innovation and Modernization Act. He said the bill would clear the way for payday lenders to sidestep state regulation and would strip away the state’s ability to protect Arkansas consumers from predatory lending practices.
The attorneys general warned about the effects of H.R. 6139 in a letter to House Speaker John Boehner, House Majority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell.
The bill is pending before a House subcommittee.
Introduced by U.S. Rep. Blaine Luetkeymer, R-Mo., the legislation would direct the federal controller of the currency to charter National Consumer Credit Corporations, nondepository creditors that would offer financial products or services to "underserved consumers" under federal regulation. The legislation generally describes underserved consumers as those who have difficulty obtaining loans through conventional lenders.
The measure would require lenders to make available to consumers information about obtaining credit counseling, the benefits of following a regular savings plan and improving their credit ratings. Lenders also would be required to clearly disclose the true cost of any loan agreement, including all interest, feeds and related charges, and offer extended repayment plans to consumers unable to pay off a loan agreement in less than 120 days.
The federal comptroller and state attorneys general would jointly hold enforcement powers under the legislation.
Still, McDaniel called the proposed measure "an end run around Arkansas consumers and our state’s constitutional protections against usurious lending practices."
"We oppose any effort on any level to allow these kinds of businesses back within our borders," he said.
In two rulings in 2008, the Arkansas Supreme Court said lenders charging high fees for short-term loans violated the state constitution’s 17 percent interest rate limit on consumer loans. After those rulings, McDaniel told payday lenders to shut down or face prosecution, and by August 2009 no payday lender had a store open in the state.
Since then, McDaniel has gone after online lenders. In August, the attorney general obtained a court order banning a Missouri man and his companies from offering payday loans to Arkansans via the Internet.