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Payday
Loans and State Laws
What are the laws governing the payday loan
and cash advance industry?
Federal laws governing small loans
were first developed in the early part of the twentieth century. These
laws arose in response to the problem of loan sharking. Today, payday
loans are regulated under state laws. Whether or not a payday or cash
advance is legal where you live, depends on the laws and regulations of
your state. In some states, small loan rates have annual interest caps
and require installment repayment schedules. There are also some states
that have created criminal usury laws that make it impossible for payday
loans to exist. In other states, the state legislatures have either
exempted the payday loan industry from the small loan and criminal usury
rate caps, or they have completely eliminated these caps. In states
where the caps have been eliminated entirely, payday loan and cash
advance lenders can charge unlimited interest rates.
There are
currently 23 states as well as the District of Columbia that have
created state laws to specifically legalize and regulate payday loans
and cash advances. In these states, payday loan companies typically have
to be licensed and registered with the state. In some states, the payday
loan companies additionally have to either be bonded or maintain a
minimum amount of net worth. These states typically have restrictions on
payday loans such as maximum fees, maximum terms, maximum payday loan
amount, and maximum interest rates on payday loans. Some of these states
also have additional restrictions on payday loans. These additional
restrictions include prohibiting payday loan rollovers, a maximum number
of payday loans that any consumer may have at any given time, and
prohibiting payday loan companies from filing criminal charges against
consumers who fail to pay their debts. These states are Arkansas,
California, Colorado, the District of Columbia, Florida, Hawaii, Iowa,
Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, North Carolina, Ohio, Oklahoma, South Carolina,
Tennessee, Utah, Washington, and Wyoming.
There are 18
states that cap annual interest rates for payday loans at 36%.
These states also have laws that restrict payday loans in several other
ways. They have laws that restrict the maximum payday loan amount, the
maximum or minimum term for the payday loan, and the maximum fees and
charges on payday loans. They also have laws that control the payday
loan companies themselves and how they operate. These states have laws
that require special licensing for payday loan companies, that charge
payday loan companies fines when excessive interest rates are charged or
other laws are violated, and that may require payday loan companies to
carry insurance and to file annual reports. These states are Alabama,
Alaska, Arizona, Connecticut, Georgia, Maine, Maryland, Massachusetts,
Michigan, New Jersey, New York, North Dakota, Pennsylvania, Rhode
Island, Texas, Vermont, Virginia and West Virginia.
There are 9
states that have no caps on annual interest rates for payday loans. In
these states, payday loan companies can charge any interest rate and any
fees that the consumer agrees to pay. These states are Delaware, Idaho,
Illinois, Indiana, New Hampshire, New Mexico, Oregon, South Dakota, and
Wisconsin.
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Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
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