Editorial

The Arkansas way

How to answer the payday loan question

The feds are getting involved in another matter that the states can, or should, handle themselves. Welcome to 2016, or maybe 2009. This administration hasn't met an overtime rule or even a bathroom it can't ignore. Now it wants to get involved in the payday loan scam.

Well, at least this time its bureaucratic heart is in the right place. Those payday loan joints (which used to blister the Arkansas landscape like litter on the highways) feed on the poor and desperate. Like any other loan shark. An unfortunate soul in a tight spot might have to get a $500 loan for two weeks to pay an unexpected bill. But then two weeks later he might have to pay off that loan and take out another to pay the rent. Then two weeks later pay off the second loan and take out a third to pay the car note. It's a downward spiral. And when you add up all those weeks he's had to re-do the loan, the yearly interest rate could add up to hundreds of percents.

So the Consumer Financial Protection Bureau is proposing to change some rules to keep folks from this cycle of debt. It wants to force payday loan shops to make sure borrowers can afford to pay off the loans. Somehow this agency wants to make a rule so that the loan shops give each customer a Full Payment Test, which is supposed to verify that the borrower can make the loan payment and still meet basic needs. How this'll work in the real world is anybody's guess.

Another rule change would curtail rollover loans, and maybe even set a time limit so that borrowers have to wait a couple-three weeks before going back for seconds. Yet another rule would make it more difficult to automatically go into a borrower's bank account and debit funds.

OK. But there is a better way. Get rid of the whole business.

Arkansas--with the help of the state Supreme Court, the Ledge, and the current and previous attorneys general--have all but shut down the storefront payday lenders in this state. Want to know what Arkansas' downtown streets used to look like? Go south and visit Louisiana. Once you cross the state line, the place looks like a payday loan sign factory. As if that were an improvement for the Louisiana scenery. Give us old oak trees and Spanish moss any day.

Unfortunately, payday lenders still poke their tentacles into this state via the Internet. The attorney general's office might make more progress playing Whack-a-Mole than shutting down the Internet and out-of-state lenders.

Ah, but the perfect shouldn't be the enemy of the good. Shutting down the storefront payday loan shops certainly helped a lot of Arkansans, and could help Louisianians, Texans, Floridians, and folks all across the nation.

Arkansas has shown the way. It's up to other states to follow.

If they only will.

Editorial on 06/05/2016

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