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Arkansans Defeat a Predatory Lending Bill
Wednesday, March 29, 2017 7:00 AM

Arkansas Credit Union Association President Vicky Salkeld said HB 1958, Concerning the Credit Services Organizations Act of 1987, would add language to state law specifying how “credit services organizations” can offer guaranty services, which CashMax is doing.

Rep. Michelle Gray (R-District 62) said this bill would "put more definition in place regarding credit service organizations and add a consumer protection clause."

Credit unions didn’t see it that way; they knew it was a predatory lending bill in disguise, and they set out to defeat it in the Arkansas General Assembly.

CashMax has operations in North Little Rock and Hope, Arkansas. They currently make loans to high-risk borrowers. They charge the maximum 17 percent interest allowed by law and add exorbitant fees, resulting in APRs in excess of 250 percent. They claim to be within the law by not calculating their fees as interest.

Payday lending was outlawed in Arkansas in 2008, but CashMax claims to be legal by operating as a credit service organization, under the Credit Service Organization Act of 1987.

An example of an installment loan provided by CashMax: The customer applies for a loan for $600. He must repay $893.25, which is split into seven biweekly payments. Interest on the loan, which is provided through a third-party company, totals $24.75. But the consumer must also pay a credit services organization fee of $268.50 to CashMax. In this example, that includes a fee for a loan guaranty, so the credit services organization will back the loan if the consumer does not pay. Annual interest would equal 259.79 percent, when calculated under the Truth in Lending Act guidelines.

Hank Klein, former CEO of Arkansas FCU, has been a longtime opponent of predatory lending. He founded the Arkansas Against Abusive Payday Lending Coalition and was instrumental in getting payday lenders outlawed in 2008. Klein testified against HB 1958 as a concerned citizen and a volunteer with AARP.

Ron Harrod, ARCUA’s lobbyist, also testified against the bill.

The bill failed in committee with 2 yeas and 18 nays.

For more information, please contact Arkansas Credit Union Association President Vicky Salkeld at or 501-683-8313.