Arkansas Interest Rate Limit, Issue 2 (2010)

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Arkansas Constitution
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The Arkansas Interest Rate Limit Question, also known as Issue No. 2, House Joint Resolution 1004, was on the November 2, 2010 ballot in the state of Arkansas as a legislatively-referred constitutional amendment, where it was approved.Approveda The measure was sponsored by Representative Eddie Cheatham. The measure would modify interest rates limits on loans made by three groups of lending entities:[1]
  • Government entities
  • Federally insured depository institutions
  • Other lenders

The House and Senate committees on State Agencies and Governmental Affairs endorsed the constitutional amendment, which would also remove a 5 percent interest cap, but would preserve the existing 17 percent cap for consumer credit and also applies it to other non-government debt.[2]


A lawsuit that was filed to strike the measure from the ballot from the November 2, 2010 ballot took another turn, as lawyers for the side opposing the measure filed a notice of appeal on November 29, 2010. The measure was not taken off of the ballot, due to a ruling by Pulaski County Circuit Court Judge Mary McGowan just before the election took place.[3]

Previously, the lawsuit was also filed with the Arkansas Supreme Court, who heard arguments from both sides on October 21, 2010. However, on October 22, 2010, the high court then threw out the lawsuit. According to Associate Justice Donald Corbin in the ruling, "Our review of Amendment 80 and this court's well-established precedent leads us to conclude that our jurisdiction to hear challenges to amendments referred by the Legislature remains appellate in nature." However, the separate lawsuit that was filed in Pulaski County Circuit Court was still ongoing at the time of that decision. However, the court refused to keep the measure off of the ballot, with the ruling stating that the ballot title was clear enough for voters to understand.[4]

Post-election litigation

On June 16, 2011 the Arkansas Supreme Court heard arguments from attorney Eugene Sayre stating that the measure is unconstitutional. The newest legal challenge stated that the measure violated the state's single-subject rule by including three different topics in one ballot measure. The state's legislature can only refer up to three measures each election year, which Sayre claimed the lawmaking body tried to get around by putting the alleged multi-topic question on the ballot. According to Sayre: "We maintain these three are disparate and don't have a common theme, purpose or subject."[5]

At the hearing, Assistant Attorney General Scott Richardson told the justices that three aspects of the measure were related. He claimed that the items all deal with loans and financing. "That test could be used to invalidate a vast array of amendments in our constitution."

Supreme Court ruling

On June 23, 2011, the Arkansas Supreme Court upheld the amendment, stating that the amendment should be allowed, as long as the proposals in the measure were "reasonably germane." According to Justice Donald Corbin:[6]

"I think it is crystal clear that the legislature engaged in the prohibited practice of logrolling when it included section 3, which increases the maximum rate of interest that may be charged on loans and contracts, in what has now been codified as amendment 89 to the Arkansas Constitution. In so doing, the legislature violated the requirement of article 19, section 22, that it not submit more than three amendments at the same time, as well as the requirement that amendments “be so submitted as to enable the electors to vote on each amendment separately."

Election results

See also: 2010 ballot measure election results
Issue 2 (Interest Rate Limit)
Approveda Yes 448,711 64.20%

Results via Arkansas Secretary of State Election Results.

Text of amendment


The summary of the amendment read as follows, according to the 87th Legislative Session:

This resolution proposes to repeal existing constitutional provisions setting the maximum lawful rate of interest on bonds issued and loans made by or to governmental units. The resolution states that the maximum lawful rate of interest on loans by federally insured depository institutions remain at the rate that resulted from the federal preemption effective March 1, 2009. The resolution proposes to establish a maximum lawful interest rate for all other loans or contracts, authorizes governmental units to issue bonds to finance energy efficiency projects, and allows bonds for energy efficiency projects to be repaid from any source. The resolution proposes to repeal Article 19, § 13, and the interest rate provisions of Amendment Nos. 30, 38, 62, 65, and 78 of the Arkansas Constitution. The proposed effective date for the resolution is January 1, 2011.[7]

Constitutional changes

The measure was proposed to repeal Section 13 of Article 19 of the Arkansas Constitution. It also would repeal the interest rate provisions of Amendments 30, 38, 62, 65 and 78. Section 13 of Article 19 read:[8]

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(a) General Loans:
(i) The maximum lawful rate of interest on any contract entered into after the effective date hereof shall not exceed five percent (5%) per annum above the Federal Reserve Discount Rate at the time of the contract.
(ii) All such contracts having a rate of interest in excess of the maximum lawful rate shall be void as to the unpaid interest. A person who has paid interest in excess of the maximum lawful rate may recover, within the time provided by law, twice the amount of interest paid. It is unlawful for any person to knowingly charge a rate of interest in excess of the maximum lawful rate in effect at the time of the contract, and any person who does so shall be subject to such punishment as may be provided by law.
(b) Consumer Loans and Credit Sales: All contracts for consumer loans and credit sales having a greater rate of interest than seventeen percent (17%) per annum shall be void as to principal and interest and the General Assembly shall prohibit the same by law.
(c) Definitions: As used herein, the term:
(i) "consumer loans and credit sales" means credit extended to a natural person in which the money, property, or service which is the subject of the transaction is primarily for personal, family or household purposes.
(ii) "Federal Reserve Discount Rate" means the Federal Reserve discount Rate on ninety-day commercial paper in effect in the Federal Reserve Bank in the Federal Reserve District in which Arkansas is located.
(d) Miscellaneous:
(i) The rate of interest for contracts in which no rate of interest is agreed upon shall be six percent (6%) per annum.
(ii) The provisions hereof are not intended and shall not be deemed to supersede or otherwise invalidate any provisions of federal law applicable to loans or interest rates including loans secured by residential real property.
(iii) The provisions hereof revoke all provisions of State law which establish the maximum rate of interest chargeable in the State or which are otherwise inconsistent herewith.

The amendment will go into effect on May 2, 2011[9].



  • The Arkansas Chamber of Commerce/Associated Industries of Arkansas was leading the campaign in support of the measure, along with Issue 3.[10]
  • The Arkansas Municipal League endorsed and actively supported the measure. In response, city councils of 75 cities across Arkansas, both large and small, adopted resolutions recommending approval of Issue 2.[11][12]
  • Governor of Arkansas Mike Beebe stated that he would likely vote for the measure, even though the governor expressed concerns that the interest rate cap would be a "hard sell."[10]
  • The Fort Chaffee Redevelopment Authority voted to support the measure on September 16, 2010, along with Issue 3 on the Arkansas statewide ballot.[13]
  • The Paragould City Council announced their support for the issue in a news release, stating, "While these limits were aimed at protecting our consumers, they now, unfortunately, restrict credit in our state. They also impede the ability of local governments to finance important public projects such as fire stations and hospitals."[14]


The following arguments were made in favor of the proposed amendment:[1]

  • Supporters stated that the measure would help shape Arkansas into a more economically competitive stated and would help facilities run by state and local governments be more energy efficient, and permit the energy cost savings to fund related improvements.
  • The measure would eliminate below market governmental interest caps that currently prevent bond funding of essential projects. Tax supported bonds would continue to require voter approval.
  • Many Arkansas consumers relying on out of state lenders or lease to own financing would be able to obtain in-state financing and get it at a reasonable cost.



The following arguments were made in opposition to the measure:[1]

  • Opponents stated that the inclusion of three separate issues (government entities, federally insured depository institutions, and all other lenders) in one measure would create confusion among voters.
  • Letting business charge higher interest rates could pave the way for buyers to make purchases that could increase their debt, which would burden them during an economic downturn.
  • Debts for energy efficiency project bonds would take precedence over other government services, which depending on the amount of the bonds, could hurt funds that would otherwise be present for other state spending.

Media endorsements

See also: Endorsements of Arkansas ballot measures, 2010


  • The Times Record endorsed the measure, along with the two other measures on the ballot, writing in an editorial, "We recommend you vote FOR constitutional protections of hunting fish and trapping; FOR changing interest caps and supporting energy efficiency; and FOR creating more flexibility in incentives for new business. All three are votes FOR Arkansas."[15]


A challenge to the measure was filed with the Arkansas Supreme Court opposing the measure and asking the court to take the issue off of the November ballot. The lawsuit argued that the measure violated single-subject law and that the proposal combined three separate issues into one measure, sidestepping the limit on Legislature to refer only up to three measures in an election year. The Arkansas Supreme Court heard oral arguments on October 21, 2010 concerning the litigation. Lawyers for April Forrester, who resided in Jacksonville and was the plaintiff of the lawsuit, also filed a lawsuit in Pulaski County Circuit Court challenging the measure. The Supreme Court granted the state attorney general's office until October 4, 2010 to respond to the challenge to the measure. Reports claimed that the state of Arkansas responded to the lawsuit by the October 4 deadline. The response was filed on behalf of Arkansas Secretary of State Charlie Daniels.[16][17][18][19]

The Arkansas Supreme Court denied a request that would have allowed a Pulaski County Circuit judge to rule on the lawsuit. The denial came in a per curiam order after attorneys filed the request. Attorneys argued that the deadline for the Arkansas Secretary of State to certify of the measure for the ballot was October 15, 2010, but the Supreme Court had set oral arguments for October 21, hence the request for a county circuit judge to rule on the matter instead.[20][21]

On October 22, 2010, The Arkansas Supreme Court threw out the lawsuit. According to Associate Justice Donald Corbin, "Our review of Amendment 80 and this court's well-established precedent leads us to conclude that our jurisdiction to hear challenges to amendments referred by the Legislature remains appellate in nature." However, the lawsuit that was filed in Pulaski County Circuit Court was still ongoing at the time of that decision, and was indeed allowed to rule on the lawsuit in the end.[22]

In an 11-page ruling on November 2, 2010, Pulaski County Circuit Court Judge Mary McGowan then rejected arguments against the measure, and decided not to disqualify the amendment from the general election ballot. McGowan ruled that the measure did not violate the constitutional provision limiting legislature to only place three amendments on the ballot. Eugene Sayre, who sued on behalf of Forrester, stated that he would meet with his client to decide whether or not to appeal, depending on if the measure is passed, which it did pass.[23]

Possible intervention

  • The Committee for Akransas' Future filed a motion with the Arkansas Supreme Court to intervene in the lawsuit, stating that it had the ability to "support and promote the passage of the proposed amendment will be impaired or impeded" if they were not granted permission to intervene. The ballot committee was backed by the Arkansas State Chamber of Commerce-Associated Industries of Arkansas.[24]

Path to the ballot

See also: How the Arkansas Constitution is amended

The amendment was referred to the November 2, 2010 ballot after the Arkansas House of Representatives and the Arkansas State Senate approved of the measure on April 6, 2009. A majority vote is required in both chambers of the Arkansas State Legislature to refer a measure to the ballot. (See Section 22, Article 19, Arkansas Constitution.)[25]

Additional reading

See also

Suggest a link

External links


  1. 1.0 1.1 1.2 University of Arkansas, "Issue No. 2," accessed September 9, 2010
  2. Arkansas News, "Panel endorses measure to ease interest rate limits," April 7, 2009
  3. Arkansas Times, "Appeal filed on amendment challenge," November 29, 2010
  4. Arkansas Business, "Arkansas Supreme Court Tosses Lawsuit Over Interest Rate Ballot Issue," October 22, 2010
  5. The Republic, "Arkansas Supreme Court asked to invalidate interest rate amendment approved by voters in 2010," June 16, 2011
  6. Arkansas Times, "Supreme Court upholds three-part amendment," June 23, 2011
  7. Summary of General Legislation, "Proposed Constitutional Amendments," May 2009
  8. Arkansas Legislature, "HJR1004"
  9. [Confirmed via phone with AR SOS on 12-21-2010]
  10. 10.0 10.1 Arkansas News, "Voters to decide three ballot issues in November," August 30, 2010
  11. Jobs for Arkansas, accessed October 25, 2010 (timed out)
  12., accessed October 25, 2010
  13. Times Record Online, "Chaffee Authority OKs Funding Issues," September 17, 2010
  14. Paragould Daily Press, "Council to support amendments," October 12, 2010 (dead link)
  15. Time Record, "We Propose FOR All Three Amendments," October 25, 2010 (dead link)
  16. Arkansas Democrat Gazette, "Interest-rate ballot issue is challenged," September 25, 2010
  17. Arkansas Business, "Lawsuit says voters can be misled by amendment title," September 25, 2010
  18. Arkansas News, "UPDATE: Court sets arguments in amendment challenge; measure defended," September 30, 2010
  19., "State of Arkansas files response to ballot lawsuit," October 4, 2010
  20. Arkansas News, "Supreme Court denies request for circuit judge to rule in amendment challenge," October 7, 2010
  21. KATV7, "High court to hear Ark amendment challenge," October 21, 2010
  22. Arkansas Business, "Arkansas Supreme Court Tosses Lawsuit Over Interest Rate Ballot Issue," October 22, 2010
  23., "Judge Won’t Disqualify Ballot Issue," November 3, 2010 (dead link)
  24. Arkansas News, "Ballot committee seeks to intervene in amendment challenge," October 5, 2010
  25. Arkansas Matters, "Proposed Amendments Going to Arkansas Voters," April 7, 2009 (dead link)