Arkansas

The payday loan laws in Arkansas were established by a bill that was passed in 2001. In this Arkansas bill it states that a payday lender has the right to charge extra fees for investigating checking accounts, copying required documents, maintaining records, and closing transactions. However, in Arkansas a payday loan lender cannot charge fees in excess of $25 or 10 percent of the face value of the payday loan whichever comes first.

If customers are late paying back their loans, Arkansas sets limits on how much a payday loan lender can charge for deferring a loan. Under current Arkansas law, a payday lender cannot charge more than $10.

Under current Arkansas law, House Bill 2440 enforces the following:

• No payday lender can lend more than one loan at a time.
• Check cashing fees for a deferred payday loan cannot exceed the total face amount of the loan.
• The total amount in fees cannot be more than $400 in one year.
• Any loan transaction that’s in violation of the provisions set by Bill 2440 will be considered void.
• No payday lender can offer two separate payday loans within a 72-hour period.
vIt’s illegal for payday loan lenders to provide one payday loan to payoff another.

A recent court case in Arkansas held that payday lenders must keep interest rates in line with Arkansas usury laws. An appeal of a class action case against Advance America was dismissed as part of a settlement in which Advance America agreed to refund fees to customers as well as forgive debts. Advance America also agreed to lower interest rates to Arkansas legal limits or below.

The type of loan at issue were payday loans, or cash advances. These are relatively new loans, usually for a small amount of money. Because the amount of a payday loan is much smaller than a traditional loan, and the short term nature of payday loans, the interest charges, and other fees, are generally higher than traditional loans.

In this particular case, which advanced as far as the Arkansas Supreme Court, there were several aspects Advance America’s business practices that were called into question. Although Advance America had described the lending in other terms, the lawsuit characterized the lending agreement as loans subject to Arkansas’s lending laws. These include an interest cap of 17%, which is defined in the state constitution. The lawsuit also nullified the lending agreement between lenders and customers. The agreement stated that the customer had to settle any dispute arising out of the loan in binding arbitration.