at high APRs secured by checks will no longer be authorized. Arizona will then earn a P in the payday loan category.
Arkansas: Despite the usury cap located in Arkansas’s constitution, the state legislature had enacted a payday loan law permitting ‘‘fees’’ (and avoiding the use of the word ‘‘interest’’) which exceeded the constitutional usury cap. In November 2008, the Arkansas Supreme Court resolved the issue, ruling that the transactions were indeed loans, and the state law was unconstitutional.35 Because of the state supreme court’s ruling, Arkansas retains its P in the payday loan category.
Delaware: On July 16, 2009, this state added statutory provisions specically authorizing title loans—without any mention of a cap on interest or fees.36 Delaware retains its F in the title loan category.
Idaho: As of July 1, 2009, if a payday lender is not licensed by the state of Idaho, any loans it makes in this state are void, uncollectible, and unenforceable.37 Not only can borrowers walk away from these loans, they can sue the unlicensed lenders to get their money back.38 This statutory change addresses the problem of Internet payday lenders. However, as Idaho lacks any cap on fees or interest rates, bor- rowers’ costs when borrowing even from a licensed lender remain high, and it retains its F in the payday loan category.
35 McGhee v. Arkansas Bd. of Collection Agencies, 289 S.W.3d 18 (Ark. 2008). On the basis of its consti- tutional usury cap, Arkansas earned a “P” for payday loans in the original Scorecard, although the McGhee decision had not yet been issued.
36 37 38
Del. Code Ann. tit. 5, §§ 2250–61. Idaho Code. Ann. § 28-46-402(3). Idaho Code. Ann. § 28-46-402(3).
NATIONAL CONSUMER LAW CENTER
Illinois: In 2009, the regulations governing auto-title loans changed the denition of a title-secured loan to include all loans secured by title to a motor vehicle, regardless of the loan’s duration.39 Under the prior regulations, such loans lasting more than sixty days were not covered. The amendment thus eliminated a long-standing loophole whereby title lenders had evaded these regulations by structuring their loans as longer than sixty days. In addi- tion, a requirement that consumers be allowed to repay the loan in substantially equal install- ments was added.40 This should result in an end to a one-month loan product repayable in a lump sum; however, one-month loan products repayable in installments were not expressly banned. As the new measures did not include a cap on interest rates or fees, lenders in Illinois can continue to charge any amount they wish for a one-month loan product, as long as it is not repayable in a lump sum. Absent a rate and fee cap, the new repayment requirement of substantially equal installments does not decrease the cost of any one-month loan products that may remain available. Illinois thus still rates an F for title lending.
Indiana: Indiana does not have title lending. The 36% annual interest rate cap on small loans (up to a certain amount) would apply to title loans, and thus keeps title lenders from opening their doors in this state. Indiana attempted to enforce its law against title lend- ers in Illinois who made title loans to Indiana consumers who came over the border to their Illinois stores. This attempt was held to be unconstitutional by a federal trial court, a deci- sion that was afrmed by a federal appellate
38 Ill. Code. R. 110.300.
38 Ill. Code. R. 110.340(b).
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