Arkansas Business

The Arkansas Supreme Court on Thursday upheld a circuit judge's ruling that a state constitutional amendment that raises the state's interest rate limit is constitutional.

In a majority opinion, the court said the ballot title of the amendment that was approved by voters in November "does not constitute a manifest fraud on the public."

The Arkansas State Chamber of Commerce lobbied for the amendment's passage in 2010. Randy Zook, its president and CEO, said the decision upholds the people's vote and is good for businesses.

"This removes the cloud of uncertainty hanging over Arkansas businesses and communities regarding interest rates on a wide range of transactions and potential bond financing activities," he said in an emailed statement.

April Forrester of Jacksonville filed the lawsuit over proposed Amendment 2. The amendment raises the state cap on interest rates on business and government loans and also allows bond funding for energy efficiency projects.

Associate Justice Donald Corbin disagreed with the ruling.

"I think it is crystal clear that the Legislature engaged in the prohibited practice of logrolling when it included (the provision) which increases the maximum rate of interest that may be charged on loans and contracts," Corbin wrote, saying it violated the law that allows legislators to send only three items to the ballot at the same time.

Two other amendments also were on the ballot.

Assistant Attorney General Scott Richardson, who represented the state during oral arguments before the high court last week, said if justices accepted Sayre's arguments it would open the door to numerous challenges of other amendments.

Arkansas' constitution had previously set the interest rate cap for consumers at 17 percent or five percentage points above the federal discount rate, whichever was lower. The amendment approved last year removed the provision tying the state limit to the federal discount rate.

Corbin said in his dissent that raising the limit would "encourage ... predatory lending practices, which can in actuality stifle economic development."

Forrester had tried to block the vote on the measure before the Nov. 2 general election. A lower court ruled on Election Day that it did not have jurisdiction in the matter.

For a PDF of the ruling, click here.

(The Associated Press contributed to this story.)