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Are Direct Payday Loans Legal In Every US State?
The short answer to this question is an emphatic no. Here in the United States we’re all subject to Federal Laws. However, each state is able to set and enact their own restrictions on short term loans. We’re often asked our opinion about that laws that govern online payday loans in the United States. You’d think that would be a somewhat easy question with a simple answer. Most industries have specific regulatory bodies that govern their industry. That type of setup for lenders that offer online loans couldn’t be any further from the truth. Most states will follow national laws and regulations when it comes to regulating a specific industry. That keeps things simple. Many of the large direct payday lenders weren’t regulated for quite some time. That led many states to adopt their own regulations for online payday loan companies. On top of that each state has chosen to specify whether they only regulate retail lenders and or online companies. As you can guess, this has caused things to become rather murky. The short term lending industry is now under the jurisdiction of the Consumer Finance Protection Bureau. We now have hundreds of federal laws and state laws that go against each other. It will be interesting to see how things shake out as the CFPB exerts more influence on the many direct payday lenders. In the meantime consumers and people online are still looking for funding. Many wonder if payday and installment loans are even legal in their state.
You can find out if direct payday loan lenders are allowed in all states by doing a simple online search. An online search tells you that direct payday loans can be issued in 37 states as of 2020. 13 states have some specific state regulation that ban short term advances. If only it was that simple! In some of those states, payday loans may not be banned completely. But rules on the book make it very difficult for actual direct lenders to make a profit. Some states have specific regulations that cap interest rates and the amount of rollovers one can do. Others have rules on how many loans one can have out at any specific time. This is great on paper but all it does is take the legitimate direct payday lenders out of the equation and brings in the suspect lenders. Take New York for example. New York has State laws on the books that are among the toughest. Most installment and cash advance lenders that operates in the US will not loan to a consumer in NY. It’s not worth their time or hassle. Many unscrupulous lenders are now lending under the cover of tribal entities. These offshore companies claim immunity from New York’s regulations. On top of that we’re also seeing old school loan sharks coming back into the fray! Imagine that, you kick out the reputable services. Now you’re left with a mobster who’s going to break your leg if you don’t pay back your cash advance by a specific date!
The legality of financial products provided by actual lenders is changing!
We can spend hours trying to break down what’s legal in each specific state. It’s hard to tell how that interacts with the Federal Government regulations as well. As you can surmise that would take a very long time and even then we’re not sure we’d be able to explain everything. Instead of wasting your time we recommend that all consumers do research on their own. Research should happen before they go with a company that offers actual loans. You can determine if your state allows cash advances and installment loans by going to your state government website. Read up on the current regulations and changes over the past fiscal year. You can also check out our resource that breaks down each state’s rules and regulations concerning actual payday loan companies. We try to keep our rules and regulations page up to date on all the latest about laws that affect direct payday lenders. With that, the rules and regulations governing direct lenders are always changing. Use this resource as a tool but always check with your state to make sure you know if payday loans direct lenders are legal in your state!