Wednesday, March 19, 2008

Arkansas Cracks Down On Payday Lenders

Regarding yesterday's post about some of the television ads I've been seeing lately, Lisa in comments mentioned payday lenders. I noticed this blurb in today's New York Times.
The attorney general moved to shut down payday lending companies in the state, saying the fees they charge harmed the working poor and violated the state Constitution’s ban on high-interest loans. Attorney General Dustin McDaniel said his office had sent letters to about 60 companies that run payday lending services, asking them to shut down immediately and void customers’ debts or face the likelihood of lawsuits. The Arkansas Constitution has an unusual provision that bars lenders from charging an annual interest rate higher than 17 percent.

This law has always created some interesting scenarios. Arkansas banks which issue credit cards are routinely offering some of the lowest interest rates in the nation thanks to the interest rate law. However, credit is pretty hard to come by and the issuing banks keep credit limits far lower than what might be available on credit cards issued in other states.

And maybe that's not such a bad thing in retrospect. I can speak from personal experience.

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