Payday Loans in Arkansas and What State Law Allows

Can you legally get a payday loan in Arkansas? No. The state constitution caps interest on most consumer loans at 17% a year. A payday loan is a small loan you repay in one lump sum from your next paycheck, and it costs many times that rate.

The cap comes from Amendment 89, Section 3. Voters approved it on November 2, 2010, by 64.2% to 35.8%, according to Ballotpedia. A contract that charges more "shall be void as to principal and interest." In plain terms, the lender cannot legally collect the interest or even the amount it lent you.

In 1999 the legislature passed the Check-Cashers Act. Southern Bancorp's account says the payday industry drafted it. The Act called lenders' charges "fees" rather than interest, which let them charge rates commonly between 300% and 400%.

In March 2008, Attorney General Dustin McDaniel began a crackdown. The Arkansas Supreme Court then struck the Act down as unconstitutional. The sources disagree on when: some place the ruling in 2008, Southern Bancorp in early 2009. The last storefront, First American Cash Advance, closed on July 31, 2009.

No regulator licenses payday lenders here, because none may operate. Credit Resource says personal loan lenders are licensed through the Arkansas Securities Department. Elite Personal Finance reports one carve-out: national banks and FDIC-insured institutions headquartered in Arkansas are exempt from the 17% cap.

The Attorney General's office warns that "these usurious loans are still available on the internet." It says borrowers typically pay more than $800 to retire a $300 loan.

In 2012, McDaniel sued the operators of six websites. The sites claimed to be based in Nevis, in the Caribbean, but were run from Kansas City, Missouri. They allegedly charged more than 600%. "These usurious practices are just as illegal when offered on the Internet as when they were offered from storefronts," he said.

The sources do not address tribal lenders specifically. The AG's position is that loans above the cap are illegal and unenforceable, and the office can ask a lender or collector to cancel one. You can file a complaint through the AG's consumer protection page.

Federal rules add a second layer. The CFPB's payday rule limits how lenders pull repeated payments from your bank account. Its ability-to-repay requirements were revoked in July 2020.

A George Mason University study, cited by Elite Personal Finance, found that some borrowers cross state lines for loans. That can mean a trip to lenders in Oklahoma or across the line in Missouri, where the rules differ.

Our sources name no Arkansas credit union payday-alternative loans and no state assistance programs. We cannot point you to one without a source. Ask your own credit union directly what small-dollar loans it offers.

An underwriter reading your bank statements will see a payday lender's deposit and its automatic withdrawals. Expect a request for a letter of explanation, which is a short signed note saying what the loan was and whether it is paid.

An open loan's payment can count in your debt-to-income ratio, the share of monthly income that goes to debt. Paying it off before you apply removes that question, though your lender sets the exact rule.

In Arkansas there is one more step. If a lender charged you more than 17%, the loan may be void. Contact the AG's office before you pay it.