Direct Payday Loan Lending Laws For 2023
Do you know that some states don’t allow direct payday loans? Or did you know that some states allow installment loans but outright ban most forms of payday lending? There are hundreds of nuances like this throughout the country, and you need to be aware of how your state regulates short term online loans. The Consumer Finance Protection Bureau and Federal Trade Commission are both charged with regulating payday lending nationally. Still, there hasn’t been much done over the past few years. State legislatures have decided to regulate the payday loan industry on a state level instead of waiting for new federal payday loan regulations.
Every state regulates the nation’s direct payday and installment lenders differently. These regulations apply to retail and online payday lenders, but not all lenders feel these rules apply. Consult your attorney or state regulator for more information on what’s allowed in your state. Be sure you know your state’s rules and regulations before you move forward with any direct payday loan or installment loan.
Have you checked your state’s regulations regarding direct cash advance lenders and found out that you can apply for a payday loan where you live? If so, check out our database of direct payday loan lenders. We only compare companies that offer online loans. Whether you have bad credit or not, you can also use our database of lenders to determine which type of loan is best for your situation. We try to break down each company’s interest rate and details.
State-by-State Payday Lending Laws & Regulations
Last Updated 2/23/2023
There have been some updates to the short term lending industry regulations since we last updated this page. Some of these updates consist of proposed changes and some of them consist of already enacted changes. As always you’ll want to check your state’s financial affairs website before you apply with a direct payday loan lender. Many of the proposed changes that people talk about come from the Consumer Financial Protection Bureau. These new regulations have been approved, but we don’t yet know how the implementation will play out. Essentially the CFPB has proposed rules that would regulate the payday loan industry on a federal level. This is a stark change from where things are now, with states regulating the payday lending industry.
The CFPB proposed several options that would affect many of the largest direct payday lenders that operate in this space. The biggest change would be that a direct lender must be comfortable in knowing that a consumer had the financial ability to pay back their loan. The CFPB proposes this could be done by enacting a 60 day cooling-off period between loans. The CFPB has also suggested that no consumer would be allowed to be in debt to a direct payday lender for more than 90 days total in any 12-month period. These federal rules are only proposed and it remains to be seen when and how they will be enacted. We will update this page as more information comes out.
The finance charges can not exceed 17.5% of the total amount advanced. As of last year, Alabama is looking to implement a database of cash advance loans issued to in-state residents. Alabama wants to ensure that lenders don’t issue more loans than the amount allowed per state regulations. Update – A recently enacted bill would give consumers at least 6 months to pay off a payday loan.
The finance charge can not exceed 15% of the total amount advanced. Rollovers for any short term loan are not allowed in Alaska. However, you can take out as many loans as you want at any specific time.
Most offers for payday loans in Arizona have been banned for years. This means that any online payday loans offered to consumers in Arizona with rates above 36% are prohibited. Even with these restrictions, big banks are small companies that try to “work around” these restrictions. For example, Wells Fargo offers advances to their customers that use direct deposit. Some small lenders offer complicated cash advances or lines of credit that may violate state laws. Many car title loan companies operate online and in person at retail locations in large cities like Phoenix and Tucson.
Direct Payday loans have been illegal in Arkansas since 2008. There have been no “storefront” operations in the state since payday lending was prohibited. They are surrounded by states that allow direct payday lenders while no loans can be issued with an interest rate of more than 17%.
The largest fee a payday loan company can charge is 36%. Essentially this brings the APR to 460% if you’re looking at a two-week loan. California is busy regarding new rules and regulations for direct payday lenders. There are rumors in the California State Assembly interest rate limits and further limits on the number of loans that can be outstanding at any given time. These regulations would apply to both car title loans and payday advance loans in CA.
There have been some recent changes to the Colorado law regarding the amount of time one has to pay off a direct payday loan. As of a few months ago, a consumer now has 6 months to pay off their payday loan. There is a 30-day waiting period before you can take out another loan and a lender can only charge an interest rate of up to 45%.
Payday loans are technically illegal in Connecticut. The state has implemented several ways for consumers to get short term cash. For example, the state will allow direct payday lenders to operate if they have a license to deposit checks into a consumer’s account. That said, the state makes it challenging to be in the payday lending business.
In response to recent regulatory changes, the online loan term in Delaware has been set at 60 days. Under House Bill 289, consumers can take out no more than five payday loans over a one year period. Also, the state is creating a database of cash advance loans issued to ensure this is enforced.
District of Columbia
Payday loans have been illegal in D.C. for quite some time now. No direct lenders should be operating within the district. A small loan interest cap of 24% is strictly enforced. D.C. is surrounded by states that offer direct payday loans.
A consumer can only have one direct loan ongoing at any given time. As of this summer, the interest rate will be 10% of the amount. Florida discourages rollovers on most payday loans. They limit direct cash advance loans to less than 31 days. Interestingly they require a loan to be in force for at least 7 days.
For the most part, online payday loans are illegal in Georgia. This applies to any lender charging over 30% for a direct loan. The only way to legally obtain a payday loan in Georgia is through an out-of-state bank insured by the FDIC. Of note, car title loans and other long term loan offers are allowed.
You can have an outstanding loan in Hawaii for up to 32 days. Anything longer than that is technically illegal. Companies are allowed to charge a fee of up to 15% of the total amount borrowed.
The state of Idaho is pretty liberal regarding enforcing cash advances and payday loan companies. They set a high limit of $1,000 on payday loans in Idaho and you can renew a direct payday loan up to 3 times. After 3 renewals, the online payday loan must be paid in full for another round of financing.
As of 2022, the Illinois Legislative Body decided to strengthen its payday loan regulations. Lenders can not charge more than 15% of every $100 borrowed. This means the effective APR in the state is up to 400%. A lender can not issue a payday loan if it means you’ll be in debt for more than 45 days.
Indiana will allow no more than 15% of every $100 borrowed as fees. Interestingly, there’s a sliding scale from 15% down to 13% down to 11% as you borrow more money. Check the state statutes for more information about these loan restrictions.
Much like most other Midwest states, you can not be assessed a fee of more than 15% of every $100 borrowed in Iowa. To be a licensed direct payday lender in Iowa, you must have a physical presence in the state and be listed in the state registry of lenders.
Kansas has a minimum loan term of 7 days and an online loan of 30 days. No lender operating in the state can charge fees more than 15% of the total amount borrowed.
Kentucky will let you have an outstanding payday loan for up to 60 days. You can have no more than 2 payday loans outstanding at any time. Kentucky law allows cash advance lenders to charge up to 15% of the total amount borrowed as fees.
You can have a cash advance or payday loan for no more than 30 days in Louisiana. A lender can charge fees up to 16% of the total amount borrowed. Louisiana state law also allows direct payday lenders to assess a $10 documentation fee each time a loan is taken out.
There aren’t any definitive rules about direct payday lenders in Maine. A big factor in Maine is that online payday and installment lenders may not charge more than 30% interest. This applies to any online payday loan that is less than $2,000. Any amount between 2k and 4k will be assessed at an interest rate no greater than 24%.
The State of Maryland effectively bans direct payday lenders from operating from offering loans by capping interest rates that can be charged. The highest interest rate that can be charged in Maryland by a cash advance, installment lender, or direct payday lender is 33%.
All direct payday lenders and cash advance companies in Massachusetts that offer payday loans with rates above 12% must register with the state. The state has capped interest rates at 23% and allowed companies to charge an administrative fee of no more than $20 each time a loan is issued. Massachusetts does not allow most car title loan lenders to operate.
The longest short term lending length in MI is capped at 31 days. Michigan has strict interest rates rules on a sliding scale for payday loans from a direct lender. As an example, 15% can be assessed on the first $100, followed by 14% on the second hundred. There’s much to know about these interest rate levels and how they affect cash advance loans.
Minnesota will not allow a payday loan to be extended past 30 days. Regarding interest rates, they have specific rules for loans issued by direct payday lenders of between $50-$250. Any loans issued over $250 can not charge more than 33% as interest.
Mississippi is rather strict when it comes to regulating direct payday lenders. For a while, payday lenders ran rampant in the state. Since then, new limits on payday loan amounts and fees have been implemented. For example, the loan tenure is anywhere from 28-30 days, with no rollovers. These new regulations were implemented because Mississippi has more retail payday lending per capita than almost every other state!
If you live in Missouri, you’ll have more luck finding cash advance companies than in most other states. Missouri has many online and physical direct payday loan lenders doing business there. There is a max loan term of 31 days and no consumer shall be forced to pay back more than 75% of the starting loan amount in fees in interest. They have different laws that only apply to car title loan companies.
Montana’s direct payday loan laws are middle of the road compared to other states. For example, the smallest loan allowed is $50, with the max being $300. The state effectively caps interest rates on payday loans at 36%. This does not include any fees assessed because of NSF charges.
The State of Nebraska officially recognized and authorized direct payday loan lenders in the early ’90s. This only applies to cash advance lenders with a physical presence in the state. These firms must have a bond amount of $50,000 and cash on hand of $25,000. No lender can charge more than 15% of the total amount borrowed.
Nevada differs from most states regarding the amount you can borrow for a payday loan. A resident can borrow no more than 25% of their monthly income when applying for an online payday loan in NV. This means there is no effective cap on online loans from direct lenders. Interest rates vary, so consumers should consider a direct payday or installment loan carefully.
The rules regarding personal loans in New Hampshire are middle of the road compared to other states. Cash advance lenders can not issue a loan or a combination of loans for more than $500 at any time. Also, state regulations say a direct payday loan must be set for at least 7 days but can’t last longer than 30 days.
Payday loans and installment loans are technically not allowed in New Jersey. However, the laws are not as strong as other states that forbid direct payday lenders. This means that some lenders are lending in the state using loopholes in the current regulations. Companies that provide online loans in New Jersey claim the “interest rates” are fees instead of actual interest rates. A few groups are trying to change these loopholes, and we’ll see what occurs in 2023.
New laws were enacted in New Mexico that outline what types of fees can be charged for direct payday loans. No direct lender can have a loan maturity date longer than 35 days. Also, New Mexico law states that no lender can issue a payday loan if that loan exceeds more than 25% of that person’s gross monthly income. This applies to many personal loans being issued at any given time as well.
New York may be the most challenging state when finding cash advance lenders. Payday Loans are illegal in the state. New York’s financial regulators are tough on anyone considering doing business.
Storefront direct payday lenders are outlawed in North Carolina. However, some offshore companies and tribal lenders still operate in the state. These companies are still offering loans in North Carolina. They feel they’re exempt from North Carolina’s ban on storefront direct payday lenders.
North Dakota used to be lenient regarding direct payday loan rules and regulations. But that all changed with new legislation by the State legislature. Online lending is illegal in the state, with some restrictions. For example, no payday lender can issue a loan if a consumer has more than $600 already outstanding to that lender or to any other lender. Also, a cash advance must be issued for at least 15 days but it can not exceed 60 days. This takes into consideration the initial deferral and one renewal. There is legislation pending in North Dakota that may outlaw tribal installment loans.
House Bill 123 has recently passed in Ohio. This new legislation limits fee and interest caps for all licensed lenders. It also eliminates the use of credit access businesses. There are three main rules regarding regulations for direct payday lenders in Ohio. A lender licensed to do business in Ohio can issue a direct payday loan for no longer than 31 days. Interest can not exceed an APR of any more than 28%. A borrower can not take out a payday loan for more than $500. This restriction also applies to multiple concurrent loans.
If a lender wants to operate in Oklahoma, they must follow a few regulations. For example, a deferred deposit loan(payday loan) can not last for more than 45 days and any less than 12 days. Also, a payday loan lender can not charge a finance rate or annual percentage rate exceeding $15 for every $100 borrowed.
Compared to other states, Oregon allows very high payday loan amounts in their state. The rest of their regulations are more or less in line with other states. No payday loans can be issued, whereas more than 36% interest is charged. No direct lender can charge an initiation fee that exceeds $10 for every $100 borrowed.
Most direct payday loan lenders do not operate in Pennsylvania. State law says that check cashiers can not make or issue payday loans. This bars retail and online loans from being published in the state. It seems that installment loans seem to be available, but it would be best to consult an attorney or a Pennsylvania state regulator for more information.
Rhode Island allows you to have up to 3 payday loans outstanding at any time. There is no specific loan term in this state. You can extend cash advance loans for as long as needed as you pay the finance charges. The minimum loan term in Rhode Island is 13 days.
Like most other states with generous direct payday loan laws, South Carolina will not allow a payday loan to have a term longer than 31 days. There appears to be no minimum term for short term financing offered in the state. No licensed direct payday lender can charge a fee that’s more than 15% of the total amount borrowed.
South Dakota is a bit vague about the general rules or regulations of payday loans offered in their state. For example, there is no set amount of time for how a loan can be issued for. Also, the state doesn’t specify a limit on how many loans you can have outstanding at any time. One of the few rules is that you can only roll over a cash advance four times.
The State of Tennessee will let you have up to 3 loans outstanding at any given time and the longest term you can have a loan outstanding is 31 days. You are allowed no rollovers; the finance charge on direct payday and installment loans is 15% of the total amount borrowed.
There are several different specifications and limits governing direct lenders in Texas. The loan term can be anywhere from 7-31 days. Finance charge limits range from 80% to well over 500% depending on the loan details. It would be best to contact an attorney or the Texas state government for more information. Most large cities like Dallas, Austin, and Houston have specific regulations.
There is no limit in the State of Utah for a loan amount when it comes to payday lending and installment loans. Furthermore, a direct payday loan can not last more than ten weeks and there is no limit on the number of loans you can have outstanding at any given time. It’s safe to say that Utah is very lenient when it comes to payday loan regulations.
Online payday loans are currently prohibited in Vermont. There are some restrictions on what the state terms “small loans,” but that’s it. A “small loan” is restricted to an interest rate of 18%. We expect to see additional regulations put in place as we move toward the upcoming legislative year in 2023.
Virginia will allow fees and finance charges of up to 36% APR. They also allow a $5 processing for all direct payday loans issued. You can only have one outstanding at any given time in Virginia. There are no rollovers allowed on any payday advances that have been offered in-state.
Washington views the loan cap rule differently than most other states. They have a nominal $700 loan amount and the state also says the loan amount can not exceed 30% of the borrower’s gross income. They’ll go by whichever is lower. They allow no rollovers and have a max loan tenure of 45 days. Finance charges are capped at 15% of the first $500 borrowed.
West Virginia does not allow direct payday lenders or installment loans. There are some types of loans allowed where rates are capped at 31% but it’s unclear what type of loans that apply to. It would be best to consult an attorney or state regulator for more information if you live in West Virginia.
Wisconsin is an excellent state to be in if you need a short-term loan. They allow a direct payday lender to provide funding of up to $1500; borrowers can ask for a loan tenure of no more than 90 days. There’s no limit on the number of loans you can have outstanding, but you are only allowed one rollover on any given direct lender payday loan.
There is no limit on how much money you can borrow in Wyoming from a direct lender. They allow a max loan amount of up to one month with interest rates up to 20%. There is no limit on the number of loans outstanding and rollovers.
Check back monthly for updates to direct payday loan laws and regulations in all 50 states