Payday Lending/Check Cashing
Since 2008, the Attorney General’s office has worked to eliminate all forms of payday lending in Arkansas. Payday lending is the practice of extending short-term loans at high annual percentage rates. It also includes so-called “installment” loans with longer terms, which carry high interest rates. Though all storefront payday loan operations in Arkansas have been shut down, these usurious loans are still available on the internet. Most online payday lenders have “roll-over” provisions that direct most, if not all, of a debtor’s payments toward loan fees without reducing the amount borrowed.
How to spot a payday loan:
- High Interest Rate: Payday loans typically carry triple-digit interest rates or high fees, even if the fees are not called “interest.”
- Short Terms: Typically, a payday loan is payable within two weeks to one month.
- Direct Bank Account Access: Payday lenders usually require information about the borrower’s bank account, either through a check written to the lender or through electronic access.
What should I do?
- Consider alternatives to payday loans. Contact creditors to request extensions on due dates. Seek the financial assistance of family or friends. Remember, a borrower typically pays more than $800 to retire a $300 payday loan. Ultimately, you will spend most of your money on interest payments.
- If you would like to file a consumer complaint against a payday lender or a payday loan debt collector, submit an online complaint to the Consumer Protection Division.
- If your loan is illegal and unenforceable under Arkansas law, our office can request that the lender or collector cancel the loan.
- You may decide to prevent further withdrawals by closing your bank account to prevent the lender from accessing your funds. Stopping payment or closing your account will have consequences. You may be contacted by the lender or a debt collector. You could be sued. If sued, by law, our office cannot represent you.
- Some payday lenders, or related collection agencies, use harassing and abusive collection tactics. If this happens to you, you can file a complaint with our office. Also you should be aware of your rights under the Fair Debt Collection Practices Act.
Consumers without bank accounts may find it necessary to use a check casher to cash a third-party check, such as a payroll check or Social Security check. It is important to shop around for the best price. Check cashing fees can make the cost of accessing your money higher than it should be. Make sure the check casher discloses its fees to you before you do business with them. Also, some retailers in your area may be willing to cash your check for a fee which is much lower than the fees usually charged by a check casher. Check with them first before you consider using a check casher.
Beware of check cashers who:
- Charge a percentage of the face value of the check.
- Charge more than a nominal flat fee.
- Charge fees to set up an initial account with them.
- Charge a “processing fee” on top of the percentage.