LITTLE ROCK, Ark. (Legal Newsline) - Arkansas Attorney General Dustin McDaniel filed a consumer protection lawsuit Monday against a Texarkana-based pawn shop that allegedly violated state law by charging excessive interest rates on title loans.
Tri-State Pawn of Texarkana Inc. allegedly assessed illegally high interest rates on auto-title loans made with Arkansans. Auto-title loans, also known as title pawns, are high-interest, short-term loans in which the borrower gives the lender the title and key to a vehicle as collateral for a loan. The borrower maintains the possession of the vehicle as part of the loan.
McDaniel alleged that on at least two separate occasions, Tri-State Pawn charged an equivalent annual interest rate of approximately 240 percent.
"These lending practices and those similar, such as payday loans, are unfair and unconstitutional," McDaniel said. "These types of loans typically push consumers further into debt. We will continue to actively work to stop lending that harms Arkansas consumers."
The lawsuit, filed in Pulaski County Circuit Court, also alleged that Tri-State Pawn seized one borrower's vehicle prior to the due date of the borrower's payment, in addition to charging excessive interest.
McDaniel requests that the court order Tri-State Pawn to stop charging and collecting illegal interest, pay restitution and civil penalties and cancel any outstanding illegal debt.