No. Payday loans are not legal in Arkansas. The state constitution caps interest on consumer loans at 17% per year, which is well below what a payday lender needs to charge to operate, and any loan contract that exceeds that rate is void as to both principal and interest. Storefronts closed after the Arkansas Supreme Court struck down the law that had allowed them, and the Attorney General’s office now focuses on online and out-of-state lenders that still try to reach Arkansas borrowers.
Why No Storefront Will Offer You One
For nearly a decade, payday lenders operated in Arkansas under the Check Cashers Act of 1999 by framing their charges as fees for holding a postdated check rather than as interest. In McGhee v. Arkansas State Board of Collection Agencies, the Arkansas Supreme Court rejected that framing and held the fees were functionally interest. On November 6, 2008, the court declared the Check Cashers Act unconstitutional in its entirety, ruling that it “clearly and unmistakably conflicts with our Constitution.” Every storefront payday lender in the state closed.
The 17% Cap and Why It Matters
Arkansas is one of the few states that writes its interest ceiling into the constitution itself. Amendment 89, Section 3 sets the maximum lawful rate on any consumer loan or contract at 17% per year. Section 6 supplies the penalty: a contract charging more than 17% is void as to both principal and interest. A lender who charges an illegal rate does not just lose the right to collect interest. They lose the right to collect the money they lent.
One carve-out matters here. Section 2 of Amendment 89 exempts federally insured banks and credit unions headquartered in Arkansas, which is why in-state credit card APRs can run higher than 17%. The cap still applies to everyone else, including finance companies, private lenders, and online platforms.
Online and Tribal Lenders
The closure of storefronts did not end the pitches. The Attorney General’s office has noted that “these usurious loans are still available on the internet,” with many lenders using rollover provisions that steer most of each payment toward fees without reducing the balance. Some operate from other states, and some claim tribal sovereign immunity to argue Arkansas law does not reach them.
The Attorney General’s position is that if the borrower lives in Arkansas, the 17% cap applies regardless of where the lender sits or what legal theory it raises. If your loan is illegal under Arkansas law, the Attorney General’s office can request that the lender or collector cancel it entirely. Complaints go to the Consumer Protection Division through the Attorney General’s website, including complaints about harassing or abusive collection tactics.
Title Loans and Pawn Shops
Vehicle title loans are effectively illegal in Arkansas for the same reason payday loans are. Title lenders typically charge triple-digit APRs, which cannot coexist with the 17% constitutional cap, and any title loan contract exceeding that rate is void as to principal and interest.
Pawn shops are regulated separately. Interest on a pawn transaction cannot exceed 17% per year, but pawnbrokers can also charge a pawn service fee of up to 25% of the amount financed for each 30-day period, with a minimum service charge of $5 for each 15-day period. Those service charges make the total cost of a pawn transaction considerably higher than the interest rate alone, so calculate the full cost before you pledge property.
What to Do If a Lender Charged You More Than 17%
The constitutional penalty is unusually favorable to borrowers. Because a usurious contract is void as to both principal and interest under Amendment 89, Section 6, you are not legally obligated to repay any part of it. If the lender sues, the usurious rate is a complete defense, and courts will not enforce the contract.
File a complaint with the Consumer Protection Division through the Attorney General’s website. The office can step in to stop collection and request cancellation of the loan. This is worth doing even if you have already been making payments, because the void-as-to-principal-and-interest rule puts you in a stronger position than most borrowers assume.
Criminal Exposure for Unlicensed Lenders
Illegal lending in Arkansas is not only a civil matter. A person who knowingly engages in lending activity that requires a license without holding one, and who receives more than $500 in compensation within a 30-day period, commits a Class B felony punishable by 5 to 20 years in prison. Compensation of $500 or less in that period is a Class A misdemeanor. False statements or misrepresentations in lending records are also a Class B felony.
Military Borrowers
Active-duty servicemembers and their dependents get an additional layer of protection under the federal Military Lending Act. The MLA caps the Military Annual Percentage Rate at 36% on covered credit, including payday loans, deposit advances, vehicle title loans, credit cards, and most installment loans. Because Arkansas already caps consumer loan interest at 17%, the 36% MLA ceiling mostly matters for credit products from federally insured banks, which are exempt from the state cap. Servicemembers who believe a lender has violated the MLA can report the issue to the Consumer Financial Protection Bureau in addition to filing with the Arkansas Attorney General.
Legal Alternatives If You Need Cash Fast
Arkansas’s strict usury rules have pushed the market toward more affordable options. Federal credit unions offer Payday Alternative Loans (PALs) designed for borrowers who would otherwise turn to payday lenders. Application fees for PAL II loans are capped at $20 by federal regulation, and interest rates are limited by National Credit Union Administration rules.
Arkansas-based credit unions also offer personal loans within the 17% cap. Arkansas Federal Credit Union, for example, advertises personal loan APRs from 6.49% to 18.00% with terms of 12 to 84 months and no application or origination fees. Membership is usually tied to where you live or work. Compared with a payday loan carrying an effective APR of 400% or more, even the high end of a credit union’s range is dramatically cheaper.