Limits on interest rates for loans are made to protect people fortunate enough not to need protection. Just as banks are happy to give loans based on collateral to people who already have the collateral. It's a great game and doubtless makes those of us who can afford to watch it feel better. It's a species of spectator sport, like tennis.
But what of those of us who can't afford the admission fee? Suppose we're desperate for the money--so desperate we'll hock our entire future in hopes of breaking out of lifelong debt? It's a sucker's bet that may amount to our paying more than 250 percent interest on the loans we take out. Just sign right here on the bottom line and all will be not so well. Appearances can be deceiving to those easily deceived. Which is why consumer education, like other forms of real education, may be the only solution to society's ills.
Sure, there oughta be a law against rapacious interest rates, and indeed there is here in Arkansas. To get around it, loan sharks may pretend that their interest fees aren't interest fees and the law isn't the law. And the two, the desperate and those ready, willing and more than able to take advantage of them, will find one another--the way the hook finds the fish. Even without the slightest fee being necessary.
The law itself knows better than to go along with this pretense. To quote this state's Supreme Court: "Because that fee is in reality an amount owed to the lender in return for the use of borrowed money, we must conclude that the fees authorized clearly constitute interest." Case closed, but the unwholesome practice continues and doubtless will continue as long as not just language but people are abused.
What, pettifoggers like Cheney Pruett--CEO of CashMax--worry? There's one born every minute and he's happy to reel 'em in. The way he figures it, or claims to figure it, annual interest on his loans is always less than the state's constitutional limit of less than 17 percent. Walk right in, folks, and leave shirtless. Immediate seating! No waiting at all. Just a good old-fashioned shearing that'll leave the sheep bleating indefinitely.
Hank Klein of North Little Rock, who's been exposing this ruse for years, must get tired of having to explain it: "It's a continual cycle of debt. It isn't like when you buy a car, you buy a house and at the end of five years or 30 years, it's taken care of. Because the interest rates are so high, these loans are designed to keep people in debt. It's financial slavery to those companies."
Or as Tennessee Ernie Ford used to complain in the role of a coal miner who could never see the clear blue light of day, no matter how hard he worked: "You load 16 tons and what do you get? Another day older and deeper in debt."
Hank Klein used to head a commendable political-action group called Arkansans Against Abusive Payday Lending, which disbanded after payday lenders left the state back in 2008, having been chased off by then-Attorney General Dustin McDaniel with more than an assist by this state's top court. But the payday lenders were only beating a strategic retreat, not surrendering.
This isn't just a single campaign but a zig-zag war that's been going on all over the country. It pits those trying to defend the desperate and those just as determined to use them as the bait in this bait-and-switch contest. And the match will go on and on. On one side are the high-minded idealists like Hank Klein and on the other those intent on making a buck off the least among us.
It's not that the highbinders don't have a lot other irons in this ever-roaring campfire. CEO Pruett of CashMax is also a big backer of the Arkansas Medical Marijuana Amendment, for example. But to quote Hank Klein again on the subject of just CashMax: "You think it's your salvation, but it's really the anchor to drag you down to the bottom of the ocean." The same could be said of all the other get-rich-quick schemes out there that are tried-and-failed ways to get poor quick. The lottery comes immediately to mind.
Psst! Need money fast? Well, here's just the thing to ensure you'll always need it.
Editorial on 10/05/2016