Legal Status of Payday Loans by State

State Information

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• District of Columbia

States where payday lending is allowed

The page for each state where payday lending is legal gives the key cost of loan terms under state law. Look for the cost of a payday loan in dollars and annual interest rate for a 14-day $100 loan. Each page lists the maximum number of loans a consumer can have, any limits on loan renewals and requirements for extended repayment plans. Collection limits spell out the fees lenders can charge if the loan is not repaid and whether the lender can use or threaten criminal action if a borrower is unable to make good on the check used to get a loan.

States where payday lending is prohibited

In states that still have small loan rate caps or usury laws, the state page gives the citation for the law that limits rates, and the small loan rate cap.

Contact Information for State Regulators

All state pages list the state payday loan or small loan regulator, contact information and web site. A link to file a complaint with the Consumer Financial Protection Bureau is provided on each state page.

Legal Status of Payday Lending

Payday loans are small loans subject to state regulation. Traditionally states have capped small loan rates at 24 to 48 percent annual interest and required installment repayment schedules. Many states also have criminal usury laws to protect consumers.

Payday loans at triple-digit rates and due in full on the next payday are legal in states where legislatures either deregulated small loans or exempted payday loans from traditional small loan or usury laws and/or enacted legislation to authorize loans based on holding the borrower’s check or electronic payment from a bank account.

States protect their citizens from usurious payday lending by prohibiting the product or by setting rate caps or usury limits.

Georgia prohibits payday loans under racketeering laws. New York and New Jersey prohibit payday lending through online payday VT criminal usury statutes, limiting loans to 25 percent and 30 percent annual interest, respectively. Arkansas’s state constitution caps loan rates at 17 percent annual interest.

After permitting high-cost payday loans, New Hampshire capped payday loan rates at 36 percent annual interest in 2009. Montana voters passed a ballot initiative in 2010 to cap loan rates at 36 percent annual interest, effective in 2011. Colorado voters passed a similar ballot measure capping rates at 36% in 2018. South Dakota voters approved a ballot initiative in 2016 by a 75 percent vote to cap rates for payday, car title and installment loans at 36 percent annual interest. Arizona voters rejected a payday loan ballot initiative in 2008, leading to sunset of the authorizing law in 2010. North Carolina tried payday lending for a few years, then let the authorizing law expire after loans were found to trap borrowers in debt. The states of Connecticut, Maryland, Massachusetts, Pennsylvania, Vermont, and West Virginia never authorized payday loans. The District of Columbia repealed its payday law.

Small loans secured by access to the borrower’s bank account are authorized in three states at lower than typical rates. Maine caps interest at 30 percent but permits tiered fees that result in up to 261 percent annual rates for a two-week $250 loan. Oregon permits a one-month minimum term payday loan at 36 percent interest less a $10 per $100 borrowed initial loan fees. As a result, a $250 one-month loan costs 154 percent annual interest for the initial loan, and 36 percent for any subsequent loans. New Mexico took steps to limit extremely high-cost lending by instituting an APR cap of 175% while also extending the minimum loan time to 120 days. These loans also require four payments spread out across the loan period instead of a single payment at the end.

Thirty-two states either enacted legislation authorizing payday loans, failed to close loopholes exploited by the industry to make high-cost loans, or deregulated small loan interest rate caps.

Payday lending is legal in Ohio despite a ballot vote in 2008 that capped rates. The industry switched to lending under other laws which was upheld by the courts and not corrected by the Ohio legislature.

Some authorizing states somewhat limit debt-trap risks. For example, Washington limits borrowers to eight payday loans per year. Virginia requires loans to be payable in two pay cycles; however, lenders evade protections in Virginia by structuring loans as unregulated open-end lines of credit.