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The usury limit is 17% and it sits in the state constitution — where a loan above it is void as to principal and interest. The industry’s workaround was struck down by the Supreme Court.
Arkansas Constitution — the usury provision
The constitutional language is unusually severe. Contracts for consumer loans and credit sales at a rate greater than seventeen percent per annum shall be void as to principal and interest, and the General Assembly is directed to prohibit them.Arkansas · ConstitutionArkansas Constitution usury provision, quoted in the Attorney General's 2008 demand letters — all contracts for consumer loans and credit sales having a greater rate of interest than seventeen percent per annum shall be void as to principal and interest and the General Assembly shall prohibit the same
Most states that void a usurious loan void the interest. Arkansas voids the principal as well.
Payday lenders relied on the Arkansas Check-Cashers Act of 1999, which purported to treat payday fees as something other than interest — putting them outside the constitutional cap.
In Luebbers v. The Money Store (2001) the Arkansas Supreme Court held that the relevant provision was an invalid attempt to evade the usury provisions of the Arkansas Constitution. The General Assembly subsequently repealed it.
This is the same fight Ohio lost for a decade and Arizona settled at the ballot box. Arkansas settled it in court, and the constitution is why.
In March 2008 the Attorney General wrote to businesses engaged in payday lending, stating that reliance on the Check-Cashers Act as a defence against usury had been misplaced, and warning that failure to comply would likely result in a lawsuit.
The letter put the rates at issue at 300 to 500 percent, describing them as unlawful and unconscionable. Research cited at the time estimated payday lending was costing Arkansas consumers $25 million a year.
Payday lending in Arkansas ended shortly afterwards.
You can revoke authorisation and instruct your bank to stop the payment, whatever your agreement says.
What Regulation E says about automatic payments →
A payday loan is a consumer debt. If it goes unpaid, two Arkansas rules decide what a lender can do next: how long it has to sue you, and how much of your pay a court can order taken.
Being sued over an old payday loan? A collector can still file, but the time limit is a defence you can raise — and you cannot be jailed for the debt. What can and cannot happen if you don’t pay →