Arkansas voters could repeal country's lowest interest rate ceiling
There is a hotly contested gubernatorial race in Arkansas, but even fierce political rivalry doesn't keep the two candidates from agreeing on one thing - Arkansas needs Amendment 60.Skip to next paragraph
Subscribe Today to the Monitor
Currently the Arkansas constitution sets the maximum interest rate for consumer loans - such as automobile and personal loans - at 10 percent. The amendment would remove an arbitrary interest ceiling and allow state interest rates to find their own market level. This is currently the lowest ceiling in the country for consumer rates, and Arkansas is the only remaining state in which this ceiling is written into the constitution.
The amendment supporters say the ceiling is hurting the state's economy and that in order for Arkansas to remain competitive with the rest of the country, it must get it in step. They also hope that the current volatility in interest rates will show how crucial it is that Arkansas have the flexibility to respond to an unstable economic environment instead of being boxed into a corner with a set rate.
Critics, such as AFL-CIO state executive officer J. Bill Becker, maintain that if lower income groups can't afford money at the lower rates, they certainly can't afford it at any higher rates. They also say Arkansas should lead the nation in showing that little people deserve a break and keep the level low, no matter what.
''This would be nice,'' comments Bob Plunkett of the Arkansas Credit Council, an across-the-board coalition of credit groups, ''but we can't afford it.''
He cites a study done to show the relationship between employment and interest rates and says, ''the evidence is undeniable that as interest rates climbed over the past three years, had we not been stuck with a 10 percent ceiling, Arkansas would have a good 35,000 more jobs than it has today.''
He continues by noting $10 million in voter-approved school board issues that are languishing, untouched; an $8 million loss for General Motors Acceptance Corporation in auto-financing last year alone; a hospital in Mountain Home which waits in vain for residents to purchase its recent bond offering; and businesses leaving the state altogether.
He points out that the usury law was originally passed to protect the small borrower who wouldn't be able to afford exorbitant rates. ''Now, ironically, this is the first person to feel the crunch of a tight credit market,'' observes Mr. Plunkett. ''We're trying to show them it's in their interest to allow the rate to float in competition with the rest of the country. Arkansas can't afford to be totally isolated.''
Groups as diverse as the State Bar Association are rubbing elbows with the Quapaw Quarter Association (a historic site preservation group) and the Black Leadership Caucus to get the amendment passed.
Black leaders in the state are quoted as saying that this is the first time that black groups here have formed to address an economic, not a social, problem. They also say it is the biggest issue facing black citizens in the state.
Another voice saying that the issues affects everyone in the state is S. T. Ross Smith, president of the Arkansas Automobile Dealers Association. He has said, ''In the past 18 months, 1,100 (automobile related) jobs were lost and 47 auto dealers alone went out of business. This is just a prelude of what will happen if voters don't approve Amendment 60.''
The Arkansas Credit Council is leading the move to get the amendment passed in the upcoming November election. They are optimistic about their chances, according to Plunkett. And he adds, ''We certainly realize there is a nationwide recession going on, and that Amendment is not going to solve all our problems. But this restrictive ceiling is an added burden we simply can't afford to bear any longer.''