Arkansas sues online payday lender
Arkansas' attorney general sued both companies -- Arrowhead Investments, Inc. and Galaxy Marketing, Inc. -- and their owner, Christopher Hodes. The suit alleges the companies issued loans with interest rates of 782% through various websites.
In its lawsuit, the state seeks to bar the companies and their owner from offering or collecting upon high-interest loans. It also wants the companies to return all payments to the borrowers.
In 2008, the state ordered all payday lenders to cease operations because, it said, lenders were violating Arkansas usury laws. The state's constitution caps interest rates on consumers loans at 17% a year, but many of these lenders were charging borrowers triple-digit interest rates. Payday lending representatives contended these weren't loans, citing an industry-drafted Check-cashers Act enacted in 1999.
To date, more than 250 payday lending locations in Arkansas have closed. Nationally, 15 states and the District of Columbia have set limits on high-interest loans. Arizona was the most recent state to take action. In July, a 10-year-old law, which allowed payday lenders to set interest rate as high as 460%, expired.
Arkansas consumers having problems with an online payday loan or debt collector attempting to collect on a payday loan should contact the Consumer Protection Division at 501-682-2341 or 800-482-8982.