Payday Loan Rules in the United States
Most states have laws in place to protect against predatory payday loans. The laws help protect consumers from unfair lending practices and illegal interest rates and fees. These regulations can be quite different from neighboring states, so it’s important to know what you face when you apply for a payday loan. Note that the laws below are from the National Conference of State Legislatures and were current as of May 2, 2016.
Payday Loans in the Northeast
Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, and Vermont lack any laws regarding payday loans. Payday loans are not legal in Washington D.C. To borrow money in Delaware, the payday loan amount cannot exceed $1,000 and must be for a term shorter than 60 days.
Maine requires payday loan companies licensed by the state to abide by the APR limit of 30%. The state recommends borrowers check with the Bureau of Consumer Credit Protection to find out if the lender holds a valid Maine payday loan licensing.
In New Hampshire, payday loans are restricted to terms of 7 to 30 days. There is also a cap of $500 when it comes to the maximum payday loan amount. Only interest may be charged and that interest rate cannot exceed the maximum APR of 36%. Similarly, Rhode Island limits the amount you can borrow to $500, but the payday loan period cannot be shorter than 13 days.
Payday Loan in the Midwest
Payday loans in Illinois cannot exceed more than a quarter of your monthly income or $1,000, whichever is lowest. The loan length cannot be more than 120 days or less than 13. Iowa, Kansas, Nebraska, Ohio, and South Dakota cap payday loan amounts at $500. Any loan in Missouri, including online payday loans in Missouri, are capped at $500 and cannot ever have fees higher than 75% of the original loan value.
In Indiana, payday loan amounts must be at least $50 and less than $551, and Montana payday loans are similar with the $50 minimum but a $300 maximum. Michigan and North Dakota both have a maximum payday loan value of $600. Minnesota caps payday loans at $350. Wisconsin does not have a cap, but the loan is not allowed if the payday loan amount and fees come to more than 35% of your monthly income.
Payday Loans in the Southeast
Payday loans are not legal in Arkansas, Georgia, or West Virginia. North Carolina changed their laws to prohibit payday loans, but lawmakers grandfathered loans already taken out under prior laws.
Alabama, Florida, Mississippi, South Carolina, Tennessee, and Virginia all limit payday loan amounts to no greater than $500. Each state has restrictions in place that limit the payday loan length, often no more than 31 days, and there are fee/interest caps in place too. For instance, Virginia limits the payday loan APR to 36%.
In Kentucky, you may not have more than two payday loans at a time, and those two loans cannot exceed the $500 or have fees of more than $15 per $100. Louisiana has the smallest cap for payday loans in the southeast. You cannot borrow more than $350 or pay fees of more than 16.75%.
Payday Loans in the Southwest
Arizona bans payday loans, too. New Mexico requires all payday lenders to ensure the amount borrowed is not more than a quarter of a person’s monthly income. Oklahoma restricts the amount you borrow to no more than $500 and loan terms must be at least 12 days and no more than 45 days. Texas has two sets of rules. One is for loans of $100 or less, while the other is for loans of $101 or higher. For loans of $100 or less, the maximum loan length is one month for every $10 borrowed (a maximum of 6 months). For loans that are higher, it is a month for every $20 borrowed.
Payday Loans in Western States
California and Montana both put a cap on payday loans at $300. With a California payday loan, you have 31 days to repay it. Colorado’s laws help borrowers from falling into financial hardship by limiting loan amounts to $500 and giving borrowers a minimum of 6 months for repayment. Your Nevada payday loan cannot exceed a quarter of your monthly income. Hawaii and Idaho have caps of $600 and $1,000 respectively.
In Alaska, you cannot borrow more than $500, and it must be repaid within 14 days. Oregon has a generous payday loan cap of $50,000, but the loan repayment must allow at least 31 days. It’s also illegal for an Oregon payday loan company to contact you for repayment until 60 days have passed. Utah does not have a cap, but the loan cannot be rolled over unless you haven’t repaid 12 weeks after the money was first due. Finally, Washington payday loans are capped at $700 or 30% of your monthly income, whichever is lowest.