In Arkansas, it’s in our nature to look out for each other, whether it’s watching over neighbors, helping out at church, or supporting local businesses. Today, in the face of unprecedented health, economic and social upheaval, caring for each other is absolutely necessary to get through this tumultuous period in our history.
However, there are other institutions that see these challenges as an opportunity to exploit families struggling to navigate this crisis. And as Arkansans, it’s time to speak up and stand up for our neighbors.
Exploitative payday lenders are no stranger to struggling Americans. They advertise quick money for a low fee. If you can’t pay it back in a few weeks? No problem; roll it for a few extra bucks. It’s quick talk and easy money in the face of desperate people.
A few months later, the payday lender hires the customer for three or four times the original loan amount. And this is exactly where these lenders want their client to be stuck in a dead-end debt trap.
In 2009, the Arkansans said they had had enough of this abusive practice and banned these establishments from locating here. However, despite our state’s tremendous efforts to protect working families from these predators, we were reminded that predators never really go away; they hover in the distance, waiting for an opportunity to strike again.
Well, Arkansas, the wolf is back at the gate, this time in sheep’s clothing.
A federal regulatory rule finalized on October 27 undermines our state’s constitutional provisions against usurious interest and once again leaves thousands of our neighbors vulnerable to predatory payday lenders and their bottomless debt traps.
The Office of the Comptroller of the Currency’s (OCC) True Lender Rule makes it easier for predatory lenders to “partnership” with banks to evade a state’s interest rate cap, circumventing the protections the Arkansans fought to put in place – in the midst of an unprecedented pandemic and economic crisis.
This effort boasts the same way predatory lenders always have: oh fuck, it’s just a nice little way to provide credit to hard-working people who really need it. The reality is that this is a devious attempt to target the poor, the elderly, and people of color.
With this rule, states across the country that have exercised their right to manage their own affairs are now forced to reopen our communities to these predatory institutions, whether we want them to or not. And make no mistake: their presence will be known, with bright neon signs luring desperate families with warm smiles and triple-digit interest rates.
Nearly 1 in 5 Arkansans (17%) struggled with poverty even before covid-19, and with unemployment at historic highs, this rule will exacerbate that situation, pushing families in Arkansas even deeper into poverty. poverty.
Interest rate limits like the one Arkansas already has in place are among the best ways to protect consumers, as evidenced by more than a decade of enforcement. A study published by Southern Bancorp found that most former Arkansas payday loan customers fared much better financially and encouraged others to avoid the payday loan route.
The Arkansans have suffered the damage of predatory lending before and should not repeat that story. We urge federal and state policymakers to stand up for the law and Arkansas consumers, and implore the OCC to reverse the rule that facilitates these “rent-a-bank” deals to jeopardize the authority of the Arkansas. state and target families in Arkansas.
We also call on Attorney General Leslie Rutledge to use the power of his office to enforce Arkansas law against predatory lenders and protect our families.
As community development financial institutions, Hope Credit Union and Southern Bancorp are doing their part to provide fair and responsible financial services to communities targeted by payday lenders.
Our goal is to enhance financial security, not undermine it. If lawmakers want to show their commitment to protecting Arkansas families, rejecting the new OCC rule is a great place to focus their efforts.
Bill Bynum is CEO of Hope Credit Union; Darrin Williams is CEO of Southern Bancorp.
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