Opinion No.

The Honorable James G. Dietz State Representative 5301 Warden Rd., Suite H-1 North Little Rock, AR 72116

Dear Representative Dietz:

This is in response to your request for an opinion on whether a "true lease" is subject to Arkansas usury law.

In my opinion, the answer to your question is "no."

Arkansas usury law is generally applicable to actual loans, credit sales contracts, and installment sales contracts. See Ark. Const. art. 19, § 13; Bell v. Itek Leasing Corp.,262 Ark. 22, 555 S.W.2d 1 (1977). As is stated in Note, Usury — LeaseConstrued as Installment Sale, 2 U.A.L.R.L.J. 112 (1979), a "true lease" would not charge any interest and thus would not be subject to usury laws. Cf., e.g., Hill v. Bentco Leasing,Inc., 288 Ark. 623, 708 S.W.2d 608 (1986) and Bell v. ItekLeasing Corp., supra (wherein the Arkansas Supreme Court concluded that purported leases were in actuality sales contracts subject to a defense of usury). While it is thus my opinion that a "true lease" would not be subject to Arkansas usury law, it should be noted that the difficulty in such situations usually lies in determining whether a transaction is a "true lease" or a sale in disguise.

The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Catherine Templeton.

Sincerely,

WINSTON BRYANT Attorney General

WB:cyh