What a payday loan costs — before Arkansas’s rules
A payday loan typically costs $15–$20 per $100 borrowed for a two-week term — roughly 400% APR — and is due as a single lump sum on your next payday. That single-payment structure, not the fee on any one loan, is the trap: most fees come from borrowers who cannot clear the balance in one go and roll it over. Where a state caps rates below payday levels, licensed payday lending disappears and a loan above the cap is generally void — not legally collectible, whatever the contract says.
The law in Arkansas
- Rate cap
- The Arkansas Constitution caps interest at 17% per annum on loans not made by a federally insured depository institution — Amendment 89, § 3. This is a constitutional ceiling, not a statutory one, which is why it has survived every attempt to legislate around it.
- Key law
- Arkansas Constitution, Amendment 89 (2010), §§ 3 and 6(b) — successor to the Amendment 60 regime of 1982.
- Enforcement
- On 6 November 2008 the Arkansas Supreme Court struck down the Check-Cashers Act of 1999 in McGhee v. Arkansas Financial Services Ass’n (No. 08-164), holding the Act "in its entirety, clearly and unmistakably conflicts with our constitution and is unconstitutional." The record in that case showed payday contract APRs ranging from 168.20% to 558.71% against the state’s 17% ceiling. The Attorney General’s office states that it has "worked to eliminate all forms of payday lending in Arkansas" since 2008, and that while every storefront operation has been shut down, "these usurious loans are still available on the internet."
Arkansas voids usurious loans as to principal AND interest — Amendment 89 § 6(b) — so a triple-digit-APR tribal loan made to an Arkansan is not merely capped at 17%, it is unenforceable in full.
What it means for a Arkansas borrower
Arkansas is the strictest state in the country on this point, and the consequence is unusually favourable to borrowers. Amendment 89 § 6(b) provides that a contract exceeding the maximum lawful rate is "void as to principal and interest" — not merely reduced to the cap, and not void only as to the excess interest. A tribal loan carrying a triple-digit APR made to an Arkansas resident therefore has no enforceable principal under state law. One caveat: a tribal lender may still assert sovereign immunity or a tribal choice-of-law clause, and whether that argument is reached can turn on whether the lender is genuinely owned by a tribe.
If you already have a payday loan in Arkansas
A loan that violates Arkansas’s ban may be partly or fully unenforceable — which changes your options with the lender and any collector. This is general information, not legal advice.
- File a complaint with the Arkansas Attorney General’s Consumer Protection Division — the office states that where a loan is illegal and unenforceable under Arkansas law it can request that the lender or collector cancel it outright.
- Do not assume the debt is valid. Raise the constitutional usury defence in writing to the lender and to any collector, and in any collection lawsuit: under Amendment 89 § 6(b) a contract above 17% is void as to principal and interest.
- Revoke the ACH authorisation with your bank so payments stop while the enforceability question is resolved, and file in parallel with the federal CFPB, since the AG notes this lending now arrives from internet lenders outside the state.
Cheaper first — try these before a payday loan in Arkansas
Payday Loans and tribal lenders in Arkansas
Many online lenders that market payday loans to Arkansas residents are tribal lenders arguing their sovereignty places them outside state rate caps — a separate legal question this site tracks in depth. For which tribal brands lend to Arkansas residents and how state law applies to them, see the Arkansas tribal-lending page.
Tribal loans in Arkansas →Frequently asked questions
Are payday loans legal in Arkansas?
In Arkansas, a payday loan at typical rates is not legally viable. The state’s rate cap makes a ~400% APR loan void and not legally collectible, so licensed storefront payday lenders do not operate — and online or tribal lenders that lend anyway are on weak legal footing.
What is the maximum payday loan rate in Arkansas?
The Arkansas Constitution caps interest at 17% per annum on loans not made by a federally insured depository institution — Amendment 89, § 3. This is a constitutional ceiling, not a statutory one, which is why it has survived every attempt to legislate around it.
What can I do about a payday loan I already have in Arkansas?
Because Arkansas effectively bans high-cost payday loans, a loan that exceeds the state limit may be partly or fully uncollectible. File a complaint with the Arkansas Attorney General’s Consumer Protection Division — the office states that where a loan is illegal and unenforceable under Arkansas law it can request that the lender or collector cancel it outright. This is general information, not legal advice.