In the state of Arkansas payday lending is prohibited.
According to H.B. 2021 that “repeals the Check-Cashers Act, §23-52-101 et seq., to protect consumers from unlawful interest rates” and S.B. 259 “Signed by governor 3/28/11, Act 720 Repeals the Check-Cashers Act, §23-52-101 et seq.“, payday loans are illegal in Arkansas. All consumer loans are capped at 17% APR.
For years, the Attorney General’s office has worked hard to eliminate all forms of payday lending in Arkansas. However, not all the efforts were successful as usurious loans are still available online (regardless of the fact that storefront payday lenders are no longer available in Arkansas).
Arkansas Payday Lending Statutes
There is a ban on payday loan operations in the territory of the state unless they comply with the 17% usury cap.
Rates, Fees and Other Charges in Arkansas
Arkansas is the only state in the U.S. that has a usury limit written into its constitution.
In Arkansas, the rates of interest for consumer loans are capped at 17% APR, and the maximum rate that can be charged on a consumer loan or credit sale is the lesser of 17% or 5% over the Federal Discount Rate. (Const. Art. XIX §13)
“In Arkansas, Courts have held that usury occurs when a lender charges more than the legally permissible maximum rate of interest, defined by Article 19, section 13 of the Arkansas Constitution, as amended by Amendment 60.” (arkattorneys.com)
More information about payday loan laws and regulations in Arkansas can be found on the official website of the Arkansas Attorney General.
The History of Payday Loans in Arkansas
- 1999 – The Arkansas Legislature passed the Check Cashers Act with the aim to license and regulate check cashing and deferred presentment transactions businesses. However, in reality, this controversial regulation only legitimized usurious payday lending in Arkansas.
- 2000s – Rent-A-Bank became a popular scheme across the nation in the 2000s. It was another usurious loan practice that was stopped by the Federal Deposit Insurance Corporation on April 16, 2007, when the last bank seized partnering with ACE Cash Express in Arkansas. Payday lenders, thus, no longer used this sort of trick anywhere in the US.
- 2006 – the Military Lending Act effectively capped payday loans offered to the military at 36% APR. Followed by an immediate withdrawal of Advance America from the payday loan market for the military (not only in Arkansas).
- November 6, 2008 – The Arkansas Supreme Court ruled that the 1999 Check Cashers’ Act was illegal under the state’s constitution. That meant the end of the payday loan industry in Arkansas.
- 2008-2009 – The Arkansas Attorney General issued cease and desist letters to the state’s registered Check Cashers and took further action on illegal brokers.
- August 11th, 2009 – “The last payday lending business left Arkansas on August 11, 2009.“
- 2018 – Some banks (e.g. U.S. Bank) started offering a Simple Loan product (nationwide + 39 branches in Arkansas). These loans represent advances to the customers with direct deposits with 70-88% APR (despite 17% Arkansas usury cap, as it doesn’t apply to national banks). Payday loans are officially illegal.
[Updated As of February 2020]