Payday Loan Laws by State: Bans, Rate Caps and Limits
There's no single national rate cap for payday loans. Whether one is legal, and on what terms, depends on where you live.
This guide is general information for borrowers in the U.S., not financial or legal advice. Lending laws differ by state and change over time; check with your state's financial regulator or a nonprofit credit counselor about your situation.
Key points
- Payday loans are regulated mainly by the states, so the rules change at the state line.
- About 20 states and Washington, D.C., ban payday loans or cap rates near 36%.
- Where they're legal, states may limit loan size, fees, rollovers and the number of loans.
- Check a lender's license with your state's financial regulator before you apply.
Congress has never set a general interest rate cap for payday loans, so the rules come mostly from state legislatures and voters. That’s why a loan that’s routine in one state is illegal a few miles away in another.
Three broad approaches
| Approach | What it means | Examples |
|---|---|---|
| Banned by usury or other laws | Storefront payday lending isn’t allowed | New York, New Jersey, Pennsylvania, Georgia, Arkansas |
| Rate caps around 36% | Caps low enough that traditional payday loans largely disappear | South Dakota, Colorado, Nebraska, Illinois, New Mexico, Minnesota |
| Allowed with limits | Payday loans are legal, with rules on size, fees or rollovers | Many states in the South, Midwest and West |
Counts vary depending on who’s doing the counting, but roughly 20 states plus Washington, D.C., either ban payday loans or cap rates low enough to shut them out. The trend has been toward caps: voters in South Dakota (2016), Colorado (2018) and Nebraska (2020) approved 36% limits at the ballot box, and Illinois passed one in 2021. Rhode Island enacted a 36% cap in 2025 that’s scheduled to take effect on January 1, 2027.
What “allowed with limits” can mean
States that permit payday lending often set some combination of:
- A maximum loan amount, often a few hundred dollars up to about $1,000.
- A fee or interest limit, such as a set amount per $100 borrowed.
- Rollover rules, from a ban on rollovers to a cap on how many are allowed.
- Cooling-off periods between loans, or a statewide database that tracks how many loans you have.
- Extended payment plans that let you repay in installments without new fees if you can’t pay on time.
Ohio is an example of a middle path. Its 2018 law limits loans to $1,000, caps interest at 28% a year plus a limited monthly fee, and caps total fees and interest at 60% of the amount borrowed.
Helpful step
Ask any lender in writing whether your state requires it to offer an extended payment plan. Some states do, and lenders don’t always mention it.
Checking a lender
- Find your state’s financial regulator. It might be called the department of banking, financial institutions or consumer credit.
- Look up the lender’s license. Many states list licensed lenders online, and some use NMLS Consumer Access, a free public database.
- Read the contract’s disclosures. Federal law requires lenders to state the APR and the finance charge in dollars before you sign.
If your state bans payday loans, an online lender offering you one is a red flag. The same goes for lenders that won’t say where they’re licensed. And if you’re a service member or a military spouse, a separate federal cap applies wherever you live; see the Military Lending Act.
Cheaper choices exist in every state. Start with how payday loans work to see what you’d pay, then compare credit union payday alternative loans.
Common questions
Can an online lender ignore my state's rules?
Lenders generally must follow the law of the state where you live, but some claim their tribal or offshore status exempts them. Regulators and courts have often disagreed. If an unlicensed lender is charging you more than your state allows, contact your state regulator or attorney general.
Is there any federal limit?
For most borrowers, no. The exception is the Military Lending Act, which caps the cost of most consumer loans at 36% for active-duty service members and their families.
What if I borrowed from a lender that wasn't licensed?
In some states, loans from unlicensed lenders are void or uncollectable. File a complaint with your state financial regulator and ask about your rights before you keep paying.
