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Eighteen States and the District of Columbia Prohibit Extremely High Cost Payday Lending
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 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. Montanavoters passed a ballot initiative in 2010 to cap loan rates at 36 percent annual interest, effective in 2011. 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 The District of Columbia repealed its payday law.
Three States Permit Lower-Cost Payday Lending
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 lus 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. Colorado amended its payday loan law in 2010 to set a minimum six-month term for loans based on checks held by the lender. A Colorado payday loan may include charges of 45 percent per annum interest, a monthly maintenance fee of 7.5 percent per month after the first month, and a tiered system of finance charges, with 20 percent for the first $300 borrower and an additional 7.5 percent for amounts from $301 to $500. Loans can be prepaid at any time with a rebate of unearned fees, repaid in installments, or repaid in one lump sum.
Thirty-Two States Authorize High-Cost Payday Lending
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 lus 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. Colorado amended its payday loan law in 2010 to set a minimum six-month term for loans based on checks held by the lender. A Colorado payday loan may include charges of 45 percent per annum interest, a monthly maintenance fee of 7.5 percent per month after the first month, and a tiered system of finance charges, with 20 percent for the first $300 borrower and an additional 7.5 percent for amounts from $301 to $500. Loans can be prepaid at any time with a rebate of unearned fees, repaid in installments, or repaid in one lump sum.
Preparing for Tax Season 2019
It’s officially 2019 – we hope the year is off to a great start for you! With the holidays behind us, it’s time to start looking ahead to what the new year has in store. Mark your calendars, everyone. Tax Day falls on a Monday, April 15th, this year. Tax Day (the...
What is IBV?
What is IBV (Instant Bank Verification) and how does it affect my short-term loan application? You might have been asked to provide bank statements to complete your request when applying for a short-term loan. This article can help you understand why IBV is a secure,...
What is a payday loan?
Definition: A loan scheduled to be repaid in less than a year. When your business doesn't qualify for a line of credit from a bank, you might still have success in obtaining money from then in the form of a one-time, short-term loan (less than a...
List of Verified Lenders
We’ve curated a list of verified lenders for your lending needs.
LendingClub
Best lender for fair credit
SoFi
Best lender for loans of up to $100,000
Discover
Best lender for long-term loans
LightStream
Best lender for loans with a co-signer option
Net Pay Advance
Best overall lender
Marcus by Goldman Sachs
Best lender with no loan fees
Prosper
Best lender for up to 50% debt-to-income ratio
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