LITTLE ROCK — Attorney General Dustin McDaniel asked the Supreme Court on Tuesday for more time to respond to a lawsuit challenging whether a constitutional amendment to change the state’s interest rate limits should appear on the November ballot.
The suit was filed Friday on behalf of voter April Forrester of Jacksonville by attorney Eugene Sayre of Little Rock. It contends the description of the ballot proposal is “a manifest fraud” because it doesn’t make clear that retail interest limits could be made as high as 17 percent.
Sayre has asked for the case to be expedited by the court.
The attorney general agreed the case needs to be accelerated - especially with the election less than 40 days away - but asked to have until Monday to file a response.
McDaniel also asked the court for seven days to respond with a reply brief once Sayre submits a brief.
The suit names as defendant Secretary of State Charlie Daniels in his capacity as the official who certifies issues for the election ballot.
Supreme Court spokesman Stephanie Harris said the court plans to discuss the case during its conference today and could release a decision by Thursday.
“Issue 2” is the ballot name of a proposed state constitutional amendment that, if adopted by voters, would primarily do three things:
Raise the interest limit on retail lending.
Change the interest limit on government bonds.
Provide a means of financing energy-efficiency projects.
It is one of three constitutional proposals offered in this year’s election by the Legislature, which is limited by the constitution to making three constitutional proposals per election, although a fourth is allowed if it pertains to elected officials’ salaries.
The suit says the Legislature tried to bypass the three proposal limit by combining the three proposals.
Issue 2 is itself a combination of what started out in the Legislature as three separate proposals, which is one of the points raised by the lawsuit in asking the court to strike it from the ballot.
The Arkansas Constitution currently allows retail lenders to charge 5 percent more interest than the federal discount rate. The maximum rate allowed for government bonds is 2 percent above the federal discount rate. According to the Federal Reserve, the federal discount rate is the interest rate at which banks can borrow money from a Federal Reserve bank. It is currently 0.75 percent.
This means retail lenders in Arkansas can charge 5.75 percent interest and government bonds can bear 2.75 percent interest.
However, an amendment to the 2009 federal supplemental spending bill offered by U.S. Sen. Blanche Lincoln, D-Ark., temporarily overrode the interest-rate limits spelled out in the Arkansas Constitution and raised the overall cap to 17 percent. That federal remedy expires Dec. 31.
Issue 2 would allow the higher rate to continue.
The state has had a long history with interest-rate limits. Businesses like the proposed amendment as a way to be in a position to charge enough interest to offset the rates they pay when they borrow money.
Local governments also want it as a way to make buying bonds to pay for local infrastructure more attractive.
Sayre pointed to Arkansas’ history of protecting borrowers, such as by setting high fines as penalties on companies charging high interest rates.
“These business interests are seeking to raise the interest limit on loans to 17 percent and do away with the monetary penalties. In essence, those behind Issue No. 2 want their cake and want to eat it too,” Sayre said Tuesday.
Sayre said the lawsuit is an attempt to protect poor people from 17 percent credit-card rates.
“I suppose you can say that old-fashioned populism is the driving force behind trying to protect the poor (the have nots) from being gouged by those who have, and want more (the interests behind Issue No. 2),” Sayre said in an e-mail.
Arkansas State Chamber of Commerce President and Chief Executive Officer Randy Zook said last week that Sayre and his firm had been shopping around to find someone interested in being involved in a suit. He didn’t immediately respond to a message late Tuesday seeking a response to Sayre’s comments.
Arkansas, Pages 11 on 09/29/2010