By John Lyon
Arkansas News Bureau
LITTLE ROCK — A joint committee considering proposed amendments to the Arkansas Constitution endorsed a measure Tuesday to ease interest rate limits on loans to governmental entities and consumers, despite objections from a bankers’ association.
The House and Senate committees on State Agencies and Governmental Affairs endorsed House Joint Resolution 1004 by Rep. Eddie Cheatham, D-Crossett. The proposal would remove an interest rate cap of 5 percent above the federal discount rate on consumer loans but would leave in place a 17 percent cap.
Lawmakers later said they were amending the resolution to incorporate proposals by Rep. Bruce Maloch, D-Magnolia, and Sen. Shane Broadway, D-Bryant, that the committee previously voted down.
Maloch’s proposal would remove interest rate limits on bonds issued by or loans issued by or to governmental units. The limit now is 2 percent above the federal discount rate, currently set at 0.5 percent.
Some of Maloch’s language was incorporated into HJR 1004 before Tuesday, but not all, said Rep. Rick Saunders, D-Hot Springs, chairman of the House state agencies committee.
Broadway’s proposal would allow governmental entities to issue bonds to finance energy-efficiency projects and use savings from the projects to repay the loans.
Several furniture and car dealers attended Tuesday’s hearing to show support for HJR 1004, which they said would help them stay in business in tough economic times. Bill Peters, who owns a furniture store in Russellville, said his store and others are losing money — not because of a lack of customers but because of the 5.5 percent interest rate limit on consumer loans.
Businesses could raise prices to compensate, but then small businesses would be unable to compete with large chain stores, Peters said.
“This is a do-or-die for us,” he told the committee.
Banks currently are able to charge interest rates in Arkansas as high as those charged by any out-of-state bank operating in the state, but bankers said Tuesday they could lose that ability if HJR 1004 becomes part of the constitution.
“It could very well shut down commercial lending in Arkansas,” Ken Hammonds, president and CEO of the Arkansas Bankers Association, said after the hearing.
Supporters of HJR 1004 said the federal exemption banks now enjoy would not be affected.
Some legislators questioned whether voters would approve a measure to allow higher interest rates on loans.
“That’s a tough thing, for folks at the ballot box to see ‘17 percent’ and vote yes,” said Sen. Gilbert Baker, R-Conway.
“There will be opposition to it,” Maloch said.
The amended measure will need approval in the joint committee, the House and the Senate to appear on the 2010 general election ballot. Saunders said that can still happen, even though adjournment is set for Thursday, if the House suspends a rule prohibiting a bill from being on a committee calendar and the House calendar in the same day.
Two other proposed constitutional amendments, one to make hunting and fishing a constitutional right and one to let the General Assembly set new criteria for issuing bonds to attract large economic projects to the state, have already received final approval in the House and Senate and will appear on the 2010 ballot.
Every two years the Legislature can refer up to three proposed constitutional amendments to voters, or four if one involves salaries. No proposed amendments concerning salaries were filed this session.
