Our View

Our View

CashMax is just loan-sharking under a di_erent name

We’re all familiar with the idiom, “Where there is a will there is a way”. If one really wants to do something one can, and in the case of shady opportunists taking advantage of fellow human beings down on their luck finding a way around Arkansas’ tough lending laws seems to be no big deal for one entrepreneur who operates a new sort of business called CashMax.

No, it’s not a payday loan business but rather connects its customers with third-party lenders while claiming that it caps interest rates at 17 percent under Amendment 89 to the Arkansas Constitution.

So, what’s all the concern and why are city leaders and other people crying foul?

Well, while the interest rates CashMax charges for its loans are within the law the fees and annual interest charges could reach nearly 260 percent or more.

So, just exactly who is this guy they accuse as being a loan shark? Well his name is Cheney Pruett, chief executive of CashMax. He contends that the businesses he has in North Little Rock and in Hope are compliant with Arkansas law because fees do not count as interest. He also says annual interest on the loans is always less than 17 percent.

Even more interesting about this controversial business opportunist is the fact that he is a primary financial backer of the Arkansas Medical Marijuana Amendment. As we all know, or should know, one of the two proposed initiated act that we, as voters, will decide upon will allow commercial cannabis to be grown and distributed in Arkansas if passed.

Pruett has made clear he would be very interested in entering the medical marijuana business in the state.

We suspect that if one or either of these initiated acts gets voter approval Pruett would use his loan business as a customer-based distribution outlet as well as loaning money at fee rates that are as high as 260 percent or more.

So, what is all the hubbub about Pruett’s loan operation. For those who still don’t understand let us give this as a simple example. An installment loan provided by CashMax might work like this: The customer applies for a loan for $600. He must repay $893.25.

It’s split into seven bi-weekly payments.

Interest on the loan, which is provided through a third-party company, totals $24.75. But the consumer must also pay a credit services organization fee to CashMax of $268.50. In this example, that includes a fee for a loan guaranty, so the credit services organization will back the loan if the consumer does not pay. In this example, annual interest equals 259.79 percent, when calculated under the Truth in Lending Act guidelines.

The question some people may ask is what is the difference in how CashMax loans money and a typical payday loan which was outlawed in Arkansas since 2008? Well, it works like this: The customer writes a check for $377, for example, and receives $325 in cash. The lender keeps the check for two weeks but does not cash it.

The $52 charge on a $325 loan for 14 days equals 416 percent in annual interest. The customer often does not have enough money to buy back the check in two weeks. So he pays another $52 to keep the check from being cashed and avoid a “bad check” charge from his bank.

Listen folks, this is no more than putting lipstick on a pig. This is a futile attempt to disguise the truth nature of the product and we would encourage Arkansas Attorney General Leslie Rutledge to find a legal way to put a stop to this type of loan practice.