Currently, only 13 states in the US prohibit payday lending, making it illegal to take out a payday loan.

Payday loans are illegal in: Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia.

 

In Which States are Payday Loans Legal?

Payday loans are a way to get extra money before your payday. They can be extremely beneficial if you encounter a financial emergency or incur some unexpected expenses. 

Payday loans are legal in 37 states, and illegal in 13 states. The states that authorize payday lending, making it legal to take out a payday loan, include:  California, Illinois, Florida, Louisiana, Ohio, Tennessee, and Texas.

The biggest states for payday loans are California, Nevada, and Texas. Colorado, Montana, New Hampshire, and South Dakota have all set caps on payday loan interest rates.

Payday lenders have come under scrutiny regarding how justly they treat their borrowers. As a result, payday lending and similar types of loans have been made completely illegal in some US states. We’ve broken down some of the main legislation for payday loans in the US.

 

Are Payday Loans Legal in My State?

Every state has its own laws surrounding payday lending, dependent on how their customer protection office handles high-risk borrowing. If you are unsure about whether payday lending is legal in your state, you should find the information you need about payday lending in your state in this guide. 

 

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Payday loans are illegal in 13 US states.

In Which States are Payday Loans Illegal?

At the moment, 13 states prohibit payday lending, making it illegal for you to take out a payday loan. These states are: Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia.

 

Which States Have Payday Loan Caps?

Payday Loan interest rates caps have been set in four states: Colorado, Montana, New Hampshire, and South Dakota. In these four states, the annual interest rate limit on payday loans is 36%, and any additional fees have been banned. In addition, federal law also dictates that fees are capped at 36% for all members of the military, regardless of the state they live in. 

Recently, an increasing number of states have taken action to pass legislation or increase restrictions surrounding payday lending and payday loans. As of the 2020 legislative session, there are now 21 states which have pending legislation surrounding payday lending and payday lending alternatives.

Virginia is one of the states that is passing tighter payday loan legislation. The Virginian enactment replaced any references to payday loans with the term “short-term loans” instead. It also capped the interest and fees for a short-term loan to an annual rate of 36%, plus a maintenance fee. It increased the maximum value of these loans to $2,500 from $500, and implemented a set minimum duration of four months, subject to exceptions, and a maximum duration of 24 months.

 

How Can I Tell if a Payday Lender is Legally Licensed in My State?

You should always check whether a payday lender is legally licensed before taking out a payday loan.

Payday lenders or online payday loans companies should have a state-issued licence. These licenses should be visible either at the store-front, or on the website. If you are unable to see the license, you should ask to see it. If the lender is licensed, they will be able to show you their state-issued license.

If you are still unsure or have doubts, you can verify the license with your financial regulations office or state attorney.

 

Please note – This information is correct at the time of writing, but legislation can change so if you are concerned or have a query, please consult with your local government for the latest legislation on payday loans.

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