Arkansas Supreme Court
LITTLE ROCK, Ark. (Legal Newsline)-The Arkansas Supreme Court on Thursday upheld $1.4 million in fines levied against the owner of payday lending companies that operated outside the law.
The high court ruled that a lower court judge was correct in ordering Dennis Bailey, who operated 14 payday lending sites without a license, to pay the fines to the Arkansas State Board of Collection Agencies.
Bailey told the justices his case should have been remanded because the state Board of Collection Agencies' decision to fine him was based on unsworn testimony by the board's executive director, Peggy Matson.
However, the justices said Bailey should have made that argument to the board in 2006, when the panel fined him.
"In addition, he urges that Matson's testimony was neither under oath nor verified. However, after the hearing officer rejected his hearsay objection, not only did Bailey stipulate to Matson's documentary evidence, he also failed to object to the fact that her testimony was written and not under oath," the justices ruled.
At the time the Board of Collection Agencies ordered Bailey's businesses closed, their transactions were deemed void, forgiving consumers' debts because he had violated the Arkansas Check-Casher's Act.
In January 2005, he applied for a license to operate his businesses but was turned down, partly because he stopped payment on a $20,000 check he wrote Feb. 9, 2004 to pay a fine for operating a business in Pine Bluff, Ark., without a license and for violations of the state's tobacco and liquor laws.
His payday lending businesses were located in Beebe, Bryant, Corning, Harrison, Little Rock, Mountain Home, Searcy, Sheridan, Walnut Ridge, Fordyce, Camden, Hot Springs, Cabot and Newport.
The court's ruling comes on the heels of state Attorney General Dustin McDaniel's crackdown on payday lenders that he says are issuing high-interest loans that are barred by the state constitution.
McDaniel last month sent a cease-and-desist letter to 156 payday lenders in Arkansas notifying them that the state 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 17 percent currently.
"It is the position of this office that you must cease and desist your payday lending practices," McDaniel wrote to lenders.
"In addition, I hereby demand that you void any and all current and past-due obligations of your borrowers, and refrain from any collection activities related to these payday loans," he added.
From Legal Newsline: Reach reporter Chris Rizo by e-mail at firstname.lastname@example.org.