Dustin McDaniel (D)
LITTLE ROCK, Ark. (Legal Newsline)-The largest payday lender in Arkansas says it is leaving the state amid threats of legal action by Attorney General Dustin McDaniel.
Advance America, based in Spartanburg, S.C., will close its locations in Arkansas by Oct. 31 and has already stopped issuing loans there.
The Democratic attorney general in March took aim at payday lenders who were charging, in many cases, triple-digit interest rates in violation of the state constitution.
In his cease-and-desist letter to Advance America and other payday lenders, McDaniel demanded the firms stop issuing high-interest loans and forgive any outstanding debts.
The Arkansas Constitution caps interest that may be charged at five percent per annum above the Federal Reserve Discount Rate at the time of the contract, or about 17 percent currently.
Advance America President and Chief Executive Officer Ken Compton said in a statement said his company disagrees with McDaniel's determination the company was charging illegally high interest rates.
"Indeed, there has been no determination by any Arkansas court that Advance America's practices ever violated state law," Compton said.
"Still, after lengthy discussions with the attorney general's office, we have determined that it is in the best interest of both parties to avoid litigation and to resolve this matter at this time."
Advance America said that its revenues from Arkansas over the first six months of this year represented 0.7 percent of the company's total revenues. The South Carolina company estimated the costs associated with closing its Arkansas stores would be about $900,000.
In May, McDaniel filed lawsuits against 20 payday lenders that he said were continuing to violate the constitutional cap on interest rates.
From Legal Newsline: Reach reporter Chris Rizo at firstname.lastname@example.org.