In Which Sates Are Payday Loans Legal?
While payday loans are one of the fastest growing forms of credit right now, helping many people get out of a temporary financial blip, they are still not available in every single state because they can be and are abused by both the borrower and the lender.
Due to individual state law regulations differ from state to state, meaning the amount you can borrow, how much interest can be charged and other aspects of the loan agreement can vary depending on where you are located.
In fact even in some states where payday lending is technically legal, lenders choose not to operate there because regulations are so tight and it is not financially viable to them.
Fully Open States
32 states are what we might consider fully open to payday lending, with little regulation. Interest rates are charged at the lender's own discretion and the amount you can borrow is also determined by the lender's own internal assessments of your income. These are:
Alabama, Alaska, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.
If you wish to borrow in any of these states it is highly likely that you will be accepted, even with a poor credit history. However because there is less protection you should thoroughly study their rates and policies to ensure that you do not get in to any financial difficulty in paying them back.
States With Consumer Protections
There are 5 states which have a more regulated payday lending market, making it much more affordable to borrow. This is mainly due to interest rate capping. Rates can be high enough that the lenders stay in business, but low enough that consumers are generally protected.
Maine: On a $250 two week payday loan, APR is capped at 261%. For longer terms it is capped at 30 percent.
New Hampshire: Interest rates are capped at 36 percent APR.
Oregon: Borrowers must be given at least 1 month to repay their loan and rates are capped at 36% APR.
Montana: As of 2011 rates are capped at 36% APR.
Ohio: The most affordable state to take out a Payday Loan, Ohio caps interest rates at 28% APR.
The District of Columbia caps interest rates at 24 percent and forces lenders to get a special payday lending license. Because of this there are very few typical payday loan lenders and the practise is essentially non-existent.
States With No Payday Lending
There are 12 states that strictly prohibit payday lending, don't offer payday terms (i.e. much longer than a few weeks) or cap rates so low that lenders don't offer pay day terms. These are Arizona, Georgia, Arkansas, North Carolina, New York, New Jersey, West Virginia, Maryland, Pennsylvania, Connecticut, Vermont, and Massachusetts.
Close to Payday Loans
To get around some of the limitations of payday lending, lenders may offer slightly longer terms. For example most legislation defines a payday or short term loan to be no longer than 91 days, so some companies may offer terms of 92 days.
Sometimes the legislation itself forces a longer minimum term, such as 31 days, rather than the usual two weeks.
Even though there is legislation on the books some payday lenders have still been known to operate unscrupulously. Lending when they shouldn't, charging more than they should, registering as different types of company (i.e. pretending to be a mortgage company) to get around the law, and generally ignoring the rules.
In some cases where there is a limit on the amount people can borrow, companies have simply issued multiple small loans and sold it as a combined bigger loan.
Much like how Casinos are operated on Indian land, some lenders are using India tribes to issue payday loans which fall outside Federal and State law.
Lawsuits and other proceedings have been carried out over the past few years to prevent these types of loophole, but before borrowing you should always research your rights and the regulations of your state, and the background of he lender you wish to use.