Via Governing.com, the attorney general of Arkansas is ordering the shutdown of 156 "payday lending outlets" that make personal loans, with extremely high interest rates, against a borrower's future paychecks. According to the Arkansas News Bureau:
The state constitution's usury provision prohibits anyone from charging more than 17 percent interest. But payday lenders have said the triple-digit interest rates they charge are allowed by the 1999 Check Cashers Act, which says a fee paid for holding a check written before the date it is to be cashed "shall not be deemed interest."
Arkansas' highest court addressed the conflict in two opinions this year.
Justices said the 1999 law did not give payday lenders "blanket protection" to exceed the usury limit. Additionally, in both cases, the court ruled that customers can collect the surety bond from a payday lender found to have violated the state constitution's usury limit.
A group called Arkansans Against Abusive Payday Lending is trying to get banks to offer short-term loans at more reasonable rates, but the payday lenders aren't likely to go quietly. This could be an interesting fight in the attempt to keep the "predatory economy" from getting out of control.