The House failed to pass a bill Tuesday that would rein in high-cost lenders and it advanced a bill that would allow pawn brokers to charge loan fees above the interest rate cap set in the state constitution.
Senate Bill 658 by Sen. Jason Rapert, R-Bigelow, would ensure that fees count as part of the interest for operations like CashMax, which provides installment loans up to $1,000.
CashMax, which operates in North Little Rock and Hope, charges up to 280 percent interest on loans, as calculated by the company under the federal Truth in Lending Act guidelines. The Arkansas Constitution caps interest rates at 17 percent under Amendment 89.
Asked by interested parties multiple times if what the company is doing is legal, Arkansas Attorney General Leslie Rutledge, whose office received a complaint about the operation nine months ago, has been silent on whether the law allows that practice.
"We need to vote for this so we can shut this down now before other people are hurt," said Rep. Douglas House, R-North Little Rock, who presented the bill.
But Rep. Michelle Gray, R-Melbourne, said lawmakers need to recognize that there's a need for this sort of short-term lending in the state.
"I've been that college student that needed a new set of tires and where else could I go? I couldn't just go, what, just walk into a convenience store and say I need a job," she said.
Gray said it's an open question whether Amendment 89 -- which caps interest rates -- applies to CashMax.
The bill failed to pass 50-12 with a number of lawmakers absent. The vote was expunged to make way for a future vote.
The House approved House Bill 2164 by Rep. Dwight Tosh, R-Jonesboro, which would create a five-member commission comprised of two pawn brokers, two law enforcement officers and one at-large state resident. They would regulate the pawn industry.
The bill would require the commission to issue rules to ensure that the interest charged on a pawn transaction is designated as an annual percentage rate that "shall not exceed" the constitutional limit of 17 percent of the amount financed each year.
But the bill also would require the commission to issue rules under which "a pawnbroker may charge a pawn service charge that is reasonably justifiable for the burden of all services related to maintenance of the security in the pawnbroker's possession, including storing, insuring, and investigating the title of the security, but the total pawn service charge shall not exceed 25 percent ... of the amount financed for each thirty-day period in a pawn transaction, except that the pawnbroker is entitled to receive a minimum pawn service charge of five dollars ... for each fifteen-day period."
A Section on 03/22/2017