Legal Status of Payday Loans by State

State Information

Click on your state to learn if payday loans are legal or prohibited and the state law that applies.

States where payday lending is allowed

The page for each state where payday lending is legal gives the key cost of loan terms under state law. Look for the cost of a payday loan in dollars and annual interest rate for a 14-day $100 loan. Each page lists the maximum number of loans a consumer can have, any limits on loan renewals and requirements for extended repayment plans. Collection limits spell out the fees lenders can charge if the loan is not repaid and whether the lender can use or threaten criminal action if a borrower is unable to make good on the check used to get a loan.

States where payday lending is prohibited

In states that still have small loan rate caps or usury laws, the state page gives the citation for the law that limits rates, and the small loan rate cap.

Legal Status of Payday Lending

Payday loans are small loans subject to state regulation.  Traditionally states have capped small loan rates at 24 to 48 percent annual interest and required installment repayment schedules.  Many states also have criminal usury laws to protect consumers.

Payday loans at triple-digit rates and due in full on the next payday are legal in states where legislatures either deregulated small loans or exempted payday loans from traditional small loan or usury laws and/or enacted legislation to authorize loans based on holding the borrower’s check or electronic payment from a bank account.

Twenty-One 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.

18 states and the District of Columbia effectively prohibit high-cost payday lending through usury rate caps. Most states have a 36% APR cap, while Arkansas, New Jersey, New York, Pennsylvania, Vermont, Massachusetts, and the District of Columbia have even lower rate caps.

Nebraska’s voters overwhelmingly supported a ballot initiative to cap payday loan rates at 36% in 2020. Hawaii and Illinois passed laws capping interest rates at 36% in 2021. Illinois’ became effective immediately and Hawaii’s began taking effect at the start of 2022. New Mexico’s 36% rate cap was enacted in 2023 and Minnesota’s new law capping interest rates at 36% will go into effect at the start of 2024.

Three states prohibit high-cost payday lending in a more direct manner. Connecticut has banned the assignment of wages as security for a loan and West Virginia does not allow any deferred presentment loans. Georgia prohibits loans less than $3,000 to be used in payday lending.

Twenty-Nine States Authorize High-Cost Payday Lending

Twenty-nine states either enacted legislation authorizing payday loans, failed to close loopholes exploited by the industry to make high-cost loans, or deregulated small loan interest rate caps.

Payday loan states include: Alabama, Alaska, California, Delaware, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Nevada, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.

Payday lending is legal in Ohio despite a ballot vote in 2008 that capped rates.  The industry switched to lending under other laws which was upheld by the courts and not corrected by the Ohio legislature.

Some authorizing states somewhat limit debt-trap risks.  For example, Washington limits borrowers to eight payday loans per year.  Virginia requires loans to be payable in two pay cycles; however, lenders evade protections in Virginia by structuring loans as unregulated open-end lines of credit.