Laws vary from state to state. In some states, vaping is prohibited. In New Hampshire, it’s illegal to collect seaweed at night. And in Alaska, it’s unlawful for a person to get drunk at a bar and remain on the premises.
If you’re looking to take out a payday loan, various state laws are in place to protect borrowers. Some states have taken steps to ban them. So, if you’re considering a payday loan, ensure your lender meets your state’s requirements.
Table of Contents
Payday lending is illegal in 21 states and Washington, D.C.
States restrict payday lending by outlawing the product altogether or setting stringent interest rate caps or usury limits. Strict interest rate caps drive payday lenders out of the state and effectively end the practice.
3 states with specific restrictions
- Connecticut: Bans assignment of wages to secure loans
- Georgia: Prohibits all payday loans lower than $3,000
- West Virginia: Has outlawed deferred presentment loans
12 states that have capped interest rates at 36%
Arizona, Colorado, Hawaii, Illinois, Maryland, Minnesota (as of Jan. 1, 2024), Montana, Nebraska, New Hampshire, New Mexico, North Carolina and South Dakota have all capped payday loan interest rates at 36%.
6 states and Washington, D.C., have even tighter interest rate caps
Arkansas, Massachusetts, Pennsylvania, New Jersey, New York, Vermont and the District of Columbia have even lower rate caps.
Stuck in payday debt?
DebtHammer may be able to help.
Other state laws and payday loan interest rate caps
Here is a roundup of states’ laws:
Alabama
- Legal: Yes
- Rate cap: 456.25%
- Maximum loan amount: $500
- Term: 10-31 days
Alaska
- Legal: Yes
- Rate cap: 435%
- Maximum loan amount: $500
- Term: Minimum 14 days
California
- Legal: Yes, but heavily regulated
- Rate cap: 460%
- Maximum loan amount: $300
- Term: Max. 31 days
Delaware
- Legal: Yes
- Rate cap: 391%
- Maximum loan amount: $500 per loan, $1,000 max per borrower at one time
- Term: Maximum 60 days
Florida
- Legal: Yes
- Rate cap: 304%
- Maximum loan amount: $500
- Term: 7-31 days
Idaho
- Legal: Yes
- Rate cap: 652%
- Maximum loan amount: $1,000
- Term: N/A
Update: In February 2024, the Idaho state legislature introduced Senate Bill 1285, which would impose new regulations to cap the interest rate that payday lenders may charge. If passed, the measure would add a new regulation capping payday loan interest rates at 36% of the principal loan amount.
Indiana
- Legal: Yes, but heavily regulated
- Rate cap: 382%
- Maximum loan amount: $550 or 20% of gross monthly income
- Term: Minimum 14 days
Iowa
- Legal: Yes, but heavily regulated
- Rate cap: 336%
- Maximum loan amount: $500
- Term: Maximum 31 days
Kansas
- Legal: Yes, but heavily regulated
- Rate cap: 391%
- Maximum loan amount: $500
- Term: 7 to 30 days
Kentucky
- Legal: Yes, but heavily regulated
- Rate cap: 469%
- Maximum loan amount: $500
- Term: 7 to 30 days
Louisiana
- Legal: Yes, but heavily regulated
- Rate cap: 478%
- Maximum loan amount: $350
- Term: Maximum 30 days
Maine
- Legal: Yes, but heavily regulated
- Rate cap: 217%
- Maximum loan amount: $2,000
- Term: N/A
Michigan
- Legal: Yes, but heavily regulated
- Rate cap: 370%
- Maximum loan amount: $600
- Term: Maximum 31 days
Mississippi
- Legal: Yes, but heavily regulated
- Rate cap: 521%
- Maximum loan amount: $500
- Term: Maximum of 30 days
Missouri
- Legal: Yes
- Rate cap: 527%
- Maximum loan amount: $500
- Term: Maximum 31 days
Nevada
- Legal: Yes
- Rate cap: 652%
- Maximum loan amount: 25% of expected gross monthly income
- Term: Maximum 35 days
North Dakota
- Legal: Yes
- Rate cap: 526%
- Maximum loan amount: $500
- Term: Maximum 60 days
Ohio
- Legal: Yes, but heavily regulated
- Rate cap: 138%
- Maximum loan amount: $1,000
- Term: Maximum 12 months
Oklahoma
- Legal: Yes, but heavily regulated
- Rate cap: 203%
- Maximum loan amount: $1,500
- Term: Maximum 12 months
Oregon
- Legal: Yes
- Rate cap: 154% per year
- Maximum loan amount: $50,000
- Term: Maximum 60 days
Rhode Island
- Legal: Yes
- Rate cap: 261%
- Maximum loan amount: $500
- Term: Minimum 13 days
South Carolina
- Legal: Yes
- Rate cap: 395%
- Maximum loan amount: $550
- Term: Maximum 31 days
Tennessee
- Legal: Yes
- Rate cap: 460% on a 14-day loan
- Maximum loan amount: $500
- Term: Maximum 31 days
Texas
- Legal: Yes, weakly regulated
- Rate cap: 664%
- Maximum loan amount: N/A
- Term: Minimum seven days, maximum 180 days
Utah
- Legal: Yes
- Rate cap: 652%
- Maximum loan amount: No limit
- Term: May not exceed 10 weeks
Virginia
- Legal: Yes, but heavily regulated
- Rate cap: 173%
- Maximum loan amount: $2,500
- Term: Maximum 24 months
Washington
- Legal: Yes, but heavily regulated
- Rate cap: 391%
- Maximum loan amount: The lesser of $700 or 30% of gross monthly income
- Term: Maximum 45 days
Wisconsin
- Legal: Yes
- Rate cap: 516%
- Maximum loan amount: Lesser of either $1,500, including fees, or 35% of gross monthly income
- Term: 90 days or less
Wyoming
- Legal: Yes
- Rate cap: 261%
- Maximum loan amount: Not specified
- Term: One calendar month
READ MORE: Struggling with payday loan debt? Learn more about payday loan relief
Tribal payday lenders can bypass state laws
Tribal payday loans are essentially the same in practice. The only actual difference between the two is the identity of the lender. Tribal payday loans are held by payday lenders who claim to operate out of Native American reservations, though they’re almost always entirely online.
Tribal lenders argue that they fall outside the jurisdiction of state and federal laws due to “tribal sovereign immunity.” Because of this, APRs are high, often more than 800%, even in states with strict caps on payday loan interest rates. Tribal lenders also offer larger loan amounts and longer repayment terms, meaning more time for that interest to accrue.
Pro tip: Before committing to any short-term loan, research the lender to ensure your lender is following your state’s laws. The lender’s Better Business Bureau (BBB) page can be a good starting point.
Payday loans and the Military Lending Act
Regardless of state laws, if you’re a service member, payday lenders must meet specific requirements for those on active duty or their dependents as stipulated by federal law under the Military Lending Act (or MLA). For example, the APR charged can’t exceed 36% for payday loans. For this reason, some payday lenders will not offer loans to service members.
Pro tip: If you notice that the fine print of a loan application or lender web page states that military service members and their families are not eligible to borrow, the lender is unwilling to follow the terms set by the MLA. These are usually lenders to avoid, as they’re also most likely to try to sidestep state protections.
Better payday loan alternatives
- Cash advance apps
- Credit card balance transfers
- Payday Alternative Loans
- A credit card cash advance
The bottom line
Payday loans are dangerous. There’s a reason why they’re illegal in so many states. They lead to a cycle of debt that’s difficult to escape, and more than 90% of payday loan borrowers end up regretting their original payday loan.
However, if a payday loan is your only option, make sure they’re legal in your state and read the terms carefully to ensure you aren’t dealing with an unregulated tribal lender.
