Payday Loans and Cash Advance in Arkansas

Prohibited; 17% constitutional cap. Below: the law, the limits, what $300 costs here, who regulates it, and how to request a cash advance online in Arkansas.

Is a Cash Advance Legal in Arkansas?

Payday loans are not legal in Arkansas. The state constitution, as rewritten by Amendment 89 in 2010, caps the interest on consumer loans and credit sales at 17 percent a year, and Arkansas courts and the Attorney General read every fee a lender charges for the use of money as interest. A two-week loan at $15 per $100 is close to 400 percent, so no version of the classic payday loan fits under the cap. For a decade a 1999 statute, the Check-Cashers Act, tried to declare that payday fees were not interest; the Arkansas Supreme Court struck that law down, the Attorney General then ordered every payday lender in the state to close and cancel its outstanding loans, and the University of Arkansas Cooperative Extension Service records that the last payday lender left the state in 2009. Since 2008 the Attorney General has treated any loan at 17 percent or more as illegal, whether it comes from a storefront, a website or a company claiming tribal status, and the office will ask the lender or collector to cancel a loan that violates Arkansas law. What remains legal is credit at 17 percent or less: bank and credit union loans, licensed installment lenders, and employer or nonprofit help.

The governing law is Arkansas Constitution, Amendment 89 (Article 19, Section 13, maximum lawful rates of interest) (Ark. Const. amend. 89, sec. 3 (consumer loans and credit sales capped at 17% per annum)).

Loan Limits and Terms in Arkansas

Arkansas is one of the few states where the interest cap lives in the constitution rather than a statute, so the legislature cannot carve out a payday exception the way most states have. Amendment 89 sets 17 percent a year as the ceiling for consumer loans and credit sales. The Attorney General describes payday lending as short-term loans at high annual percentage rates, including installment loans with triple-digit rates and loans that require direct access to your bank account, and treats all of them as unlawful here. There is no licensing scheme for payday lenders because the product itself cannot exist at a lawful price. Lenders that make ordinary consumer loans at 17 percent or less operate under the usual state and federal lending laws.

What a $300 Loan Costs in Arkansas

The cheapest legal product is any loan priced at the constitutional maximum of 17 percent a year. Interest on $300 for 14 days at that rate is 300 x 0.17 x 14 / 365 = $1.96, so the payoff is $301.96. Checking the APR the other way: 1.96 / 300 x 365 / 14 = 0.17, or 17 percent. The Attorney General notes that a borrower typically pays more than $800 to retire a $300 payday loan elsewhere, which is why the cap matters more than the small dollar figure suggests.

Run your own numbers with the cash advance calculator.

Consumer Protections and Who to Call in Arkansas

• The Arkansas Constitution, through Amendment 89, caps interest on consumer loans and credit sales at 17 percent a year, and the cap cannot be waived by contract or changed by ordinary legislation.
• The Attorney General treats any loan at 17 percent APR or higher as illegal and, when a loan violates state law, will ask the lender or collector to cancel the debt (Arkansas Attorney General, Payday Lending and Check Cashing).
• All storefront payday loan operations in Arkansas have been shut down, so any in-person offer of a payday loan or a check-holding cash advance is not coming from a lawful Arkansas business.
• The Consumer Protection Division runs a hotline at 800-482-8982 and an online complaint form, and it can mediate with a business or sue under the Arkansas Deceptive Trade Practices Act.
• The Attorney General warns that online payday lenders still solicit Arkansans by phone and Internet and that roll-over terms drive the total cost; a loan made to an Arkansas resident is still subject to the 17 percent cap.
• Check cashers may not evade the cap by charging percentages of a check face value, excessive flat fees, account set-up fees or added processing fees, which the Attorney General lists as warning signs.

Complaints and licence checks go to the Arkansas Attorney General, Consumer Protection Division: 800-482-8982, arkansasag.gov/divisions/public-protection/consumer-protection, or file a complaint at the regulator's complaint page. The federal CFPB also takes complaints about any lender.

Online vs Storefront Lenders in Arkansas

There are no licensed payday storefronts in Arkansas: the Attorney General reports that all storefront payday loan operations have been shut down, and the Cooperative Extension Service dates the last closure to 2009. The pressure now comes entirely from online lenders, which the Attorney General says are still accessible to Arkansans and still try to entice them by phone or Internet. Those lenders often say they are based in another state, offshore or on tribal land and that Arkansas law does not apply; the Attorney General disagrees and treats a loan at 17 percent or more made to an Arkansas resident as illegal. Its office can request that the lender or collector cancel the loan, and residents are urged to file a complaint rather than keep paying. The lender may still debit an account you gave it access to, which is why the Attorney General flags direct bank-account access as a hallmark of a payday loan. Closing or changing the account and reporting the lender is the usual advice.

Alternatives If a Payday Loan Is Not the Right Fit

Everything legal in Arkansas costs 17 percent a year or less, so the alternatives are ordinary loans at ordinary prices. Banks and credit unions make small personal loans and signature loans under the cap, and federal credit unions offer Payday Alternative Loans, a small-dollar product with a capped rate and a small application fee for members. A secured credit card, an overdraft line, or a credit card cash advance also falls inside the range of what is lawful here. Non-loan options include an advance on wages from your employer, a payment plan with the utility, landlord or clinic you owe, and local emergency assistance through community action agencies. The Cooperative Extension Service and the Attorney General both suggest building a small emergency fund so a car repair does not become a loan at all. If you have already taken an illegal online loan, call the Consumer Protection Division at 800-482-8982 and ask for help cancelling it.

Compare the installment loan and payday alternative loan options before you decide.

Frequently Asked Questions

Nearby States

• MissouriThe fee cap, a worked example and the regulator to call in Missouri.
• TennesseeThe fee cap, a worked example and the regulator to call in Tennessee.
• MississippiThe fee cap, a worked example and the regulator to call in Mississippi.
• LouisianaThe fee cap, a worked example and the regulator to call in Louisiana.
• TexasThe fee cap, a worked example and the regulator to call in Texas.
• OklahomaThe fee cap, a worked example and the regulator to call in Oklahoma.