Legal Status of Payday Lending by State

Payday loans are small loans subject to state regulation. Traditionally states capped small loan rates at 24 to 48% annual interest and required installment repayment schedules for small loans. Many states also have criminal usury laws to protect consumers. For example, New York 's criminal usury cap is 25% annual interest.

Payday loans are legal in states where legislatures exempted these lenders from small loan or usury caps. In states that repealed small loan rate caps or usury limits for licensed lenders, payday lenders are allowed to charge unlimited rates.

Prohibited by Small Loan Laws or Usury Caps

Currently eleven states and two territories have small loan laws or usury caps that effectively prohibit payday lending at triple-digit interest rates. In addition, Oregon now caps one-month loans at lower than typical payday rates. The District of Columbia repealed payday loan authorization, effective early in 2008. In addition, the Arkansas Constitution caps rates at 17% annual interest, but the legislature enacted a law that permits check cashers to make single payment loans based on check holding. The constitutionality of payday lending at triple-digit interest rates in Arkansas is being challenged in the courts.

( Arkansas 1) Connecticut District of Columbia Georgia Maine 2

Maryland Massachusetts New Jersey New York 3

North Carolina 4 Oregon Pennsylvania Vermont West Virginia

Puerto Rico Virgin Islands

Authorized by Specific Payday Loan Laws or Licensed Lender Laws⁵

These states enacted safe harbor legislation for payday lenders and permit loans based on checks written on consumers' bank accounts at triple digit interest rates. The only state that does not explicitly authorize payday loans by law is Wisconsin where licensed lenders are permitted to charge any rates they choose.

¹Arkansas (Ark. Code. Ann. § 23-52-101 et seq, Ark. Const. art. 19, § 13.  In early 2008, the Arkansas Attorney General demanded that payday lenders terminate lending, void existing loans and stop collections.  Recent Supreme Court decisions focused on the Constitutional usury limit of 17% and violations of the AR Deceptive Trade Practices Act.
²Limited payday lending using the minimum finance charge exception to the general interest rate cap. 9-A MRSA § 2-401.
³New York Bank Superintendent issued an All Institutions letter June 13, 2000 confirming enforcement of New York's 25% APR criminal usury cap (§ 190.40 New York State Penal Code).
⁴North Carolina payday loan law expired August 31, 2001 when legislature did not reauthorize payday loan law. Small loan cap is 36% APR. Oregon requires at least a one month loan term and caps rates at 36% annual interest plus a one-time fee of $10 per $100 borrowed. See State Information for Oregon. (Or. Rev. Stat. Ann 725.010 et seq.)
⁵Alabama (Ala. Code § 5-18°-1 et seq.); Alaska (Alaska Stat. § 06.50.100 et seq.); Arizona (Ariz. Rev. Stat. § 6-1251 et seq.); California (Cal. Fin. Code § 23000 to 23106 ); Colorado (Colo. Rev. Stat. § 5-3.1-101 et seq.); Delaware (Del. Code Ann. Tit. 5. § 2227 et seq.); Florida (Fl. Stat. Ann. §560.401, et seq.); Hawaii (Hawaii. Rev. Stat. Ann. § 480F-1 et seq.); Idaho (Idaho Code, 28-46-401 et seq.); Illinois (Ill. Comp. Stat. Ann. § 122/1-1); Indiana (Ind. Code Ann. § 24-4-4.5-7-101 24-4.5-7-101 et seq.); Iowa (Iowa Code § 533D.1 et seq.); Kansas (Kan. Stat. Ann. § 16a-2-404); Kentucky (Ky. Rev. Stat. Ann. § 286.9-.010 et seq.); Louisiana (La. Stat. Ann. § 9:3578.1 et seq.); Michigan (Mich. Comp. Laws § 487.2121 et seq.), Minnesota (Minn. Stat. § 47.60 et seq.); Mississippi (Miss. Code Ann. § 75-67-501 et seq.); Missouri (Missouri Rev. Stat. § 408.500 to 408.506; 4 Mo. Code Regs. §§ 140-11.010, 140-11.020); Montana (Mont. Code Ann. § 31-1-701 et seq.); Nebraska (Neb. Stat. Ann. § 45-901 et seq.); Nevada (Nev. Rev. Stat. § 604A..010 et seq.); New Hampshire (N. H. Rev. Stat. Ann. § 399-A:1 et seq.); New Mexico (N.M. Stat. Ann. § 58-15-1 et seq.); North Dakota (N. D. Cent. Code § 13-08-01 et seq.); Ohio (Ohio Rev. Code Ann. § 1315.35 et seq.); Oklahoma (Okla. Stat. Tit. 59 § 3101 et seq.); Rhode Island (R.I. Stat. Ann. §§ 19-14.4-1 et seq.); South Carolina (S.C. Code Ann. § 34-39-110 et seq.); South Dakota (S. D. Codified Laws Ann. § 54-4-36 et seq.); Tennessee (Tenn. Code Ann. § 45-17-101 et seq.); Texas (7 Tex. Admin. Code § 1.605 et seq.); Utah (Utah Code Ann. § 7-23-101 et seq.); Virginia (Va. Code Ann. § 6.1-444 et seq.); Washington (Wash. Rev. Code Ann. § 31.45.010 et seq.); Wyoming (Wy.. Stat. § 40-14-362 et seq.).