Groups oppose bill that would alter law on loan-interest cap

Consumer groups and the state attorney general’s office oppose a Senate bill that proposes to alter Arkansas’ 17 percent interest rate cap.

The bill, which seeks to amend the state constitution concerning the interest-rate limit on loans, was filed this month as Senate Bill 900. It proposes to have the General Assembly define the maximum lawful rate of interest allowed in Arkansas.

The bill is on the agenda for today’s meeting of the Senate’s State Agencies and Governmental Affairs committee.

AARP opposes the bill, said Michael Rowett, spokesman for AARP in Arkansas.

“It appears to be an effort to increase the effective interest rate for small loans,” Rowett said.

Arkansans Against Abusive Payday Lending, which has fought payday lending in Arkansas since 2004, also opposes the bill, said Hank Klein, founder of the group.

Payday loans often have annual interest rates of 300 percent or higher.

Attorney General Dustin McDaniel said he views Senate Bill 900 as an attempt to bring payday lending back to Arkansas.

“I can’t think of any other reason [for the bill],” McDaniel said Monday. He’ll testify against the bill today, McDaniel said.

“If the people were intending to give the General Assembly the power to define interest, they could have

put it [in Amendment 89],” McDaniel said. “But it wasn’t placed there.”

The Supreme Court has ruled repeatedly that only it can define interest, McDaniel said.

Sen. Jon Woods, R-Springdale, a sponsor of the bill, did not return phone calls seeking comment. Sen. Jane English, R-North Little Rock, also a sponsor and a member of the State Agencies committee, also did not return a call seeking comment.

Other sponsors of the bill include Sen. Linda Chesterfield, D-Little Rock; Sen. David Burnett, D-Osceola; Rep. Micah Neal, R-Springdale; Rep. Robert Altes, R-Fort Smith; Rep. Mary Lou Slinkard, RGravette; and Rep. Karen Hopper, R-Mountain Home.

The Arkansas Constitution sets the maximum loan-interest rate that can be charged to state residents at 17 percent per year. Arkansas voters approved setting the state’s cap in 2010, Rowett said.

“If another increase is sought, supporters of increasing the state’s interest rate cap on small loans should seek a constitutional amendment to achieve this, so Arkansas voters will have full knowledge of what they’re authorizing,” Rowett said.

Woods was also a sponsor of a bill in 2011 that was designed to permit small loans to collect more than 17 percent interest. Arkansans Against Abusive Payday Lending, the AARP and the attorney general opposed that bill.

Language in the 2011 bill was similar to language in the Arkansas Check Cashers Act of 1999, which was ruled unconstitutional by the Supreme Court in 2008, the attorney general’s office said at the time.

In March 2008, McDaniel notified the state’s payday lending businesses that they must cease violating the Arkansas Constitution’s prohibition against usury. By July 2009, the last of what had been about 275 payday loan operations was closed.