In Arkansas, it is in our nature to look out for each other, whether that means checking on neighbors, helping at church, or supporting local businesses. Now, facing unprecedented health, economic and social upheaval, caring for each other is absolutely necessary for us to make it through this tumultuous period in our history.
However, there are other institutions who see these challenges as an opportunity to exploit families struggling to navigate this crisis. And as Arkansans, it’s time to raise our voices and stand up for our neighbors.
Exploitative payday lenders are no stranger to struggling Americans. They advertise fast cash for just a small fee. If you can’t repay it in a couple of weeks? No problem; roll it over for just a few more dollars. It’s fast talk and easy cash in the face of desperate people.
A few months into the future, the payday lender has the customer on the hook for three or four times the amount of the original loan. And that’s exactly where those lenders want their customer: stuck in a debt trap with no way out.
Back in 2009, Arkansans said they’d had enough of this abusive practice and banned such establishments from setting up shop here. However, despite strong efforts by our state to protect working families from these predators, we’ve been reminded that predators never really go away; they hover at a distance, waiting for an opportunity to strike again.
Well, Arkansas, the wolf is back at the door, this time wearing sheep’s clothing.
A federal regulatory rule finalized on Oct. 27 undermines our state’s constitutional provisions against usurious interest and once again makes 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 facilitates predatory lenders’ “partnerships” with banks to evade a state’s interest rate cap, circumventing the protections that Arkansans fought to put in place—in the middle of a pandemic and an unprecedented economic crisis.
This effort touts itself in the same manner that predatory lenders always have: Aw shucks, it’s just a nice little way to provide credit to hard-working folks who really need it. The reality is that it is a back-door attempt to target the poor, the elderly, and people of color.
With this rule, states across the country that have exercised their right to handle their own business are now forced to reopen our communities to these predatory institutions, whether we want them or not. And make no mistake: Their presence will be known, with bright neon signs beckoning desperate families in with warm smiles and triple digit interest rates.
Nearly 1 in 5 Arkansans (17 percent) were struggling with poverty even before covid-19, and with unemployment at historic highs, this rule will exacerbate this situation, pushing Arkansas families even deeper into poverty.
Interest rate limits like the one Arkansas already has in place are among the best ways to protect consumers, as demonstrated by more than a decade of enforcement. Research published by Southern Bancorp found that most former Arkansas payday lending customers were doing much better financially, and encouraged others to avoid the payday lending path.
Arkansans have already experienced the harm of predatory loans, and should not repeat that history. We urge federal and state policymakers to defend Arkansas’ law and consumers, and implore the OCC to reverse the rule that facilitates these “rent-a-bank” arrangements to jeopardize the state’s authority and target Arkansas families.
We also call on Attorney General Leslie Rutledge to use the power of her 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 our part to provide fair and responsible financial services to the communities targeted by payday lenders.
Our focus is on building financial security, not jeopardizing it. If lawmakers want to show their commitment to protecting Arkansas families, then rejecting the OCC’s new rule is a great place to focus their efforts.
Bill Bynum is CEO of Hope Credit Union; Darrin Williams is CEO of Southern Bancorp.