Current Payday Loan Legal Status in the US

Payday loans are thought to be controversial by a lot of people. Their legal status in the USA also differs as well as the attitude ntoward them.

Federal Law

The American government implements a range of restrictions to prevent unfair and unethical loans by means of huge and abusive interest rates. For example, it may refer to annual percentage rate with the average norm of 36%-40%. However, in a number of states payday loans are entirely illegal.

payday income

Payday loans are legal in 27 states, although they function with restrictions in 9 more states. The states where payday loans work are Alabama, Alaska, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming. In the remaining 14 states Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, and West Virginia and the District of Columbia they are prohibited. The number of rollovers also varies from state to state, it can be from 0 to 4.

As for federal acts that regulate payday lending, the Dodd–Frank Wall Street Reform and Consumer Protection , the Military Lending Act and the Truth in Lending Act are the most important. The first one gives the Consumer Financial Protection Bureau, "an agency of the United States government responsible for consumer protection in the financial sector", a right to control and regulate all payday lenders, regardless of their size. It has been functioning successfully for 6 years.

Regulation and Restrictions

States protect their citizens from unfair loans by various means starting from limits to full prohibition. For example, Georgia prohibits payday loans due to active racketeering laws.  New York and New Jersey ban payday lending under criminal usury statutes. There exist interest rates of 25% and 30% per year respectively. While in Arkansas the possible annual rate can be up to 17%. South Dakota keeps the interest rate at the level of 36% annually. Oregon permits a 1-month minimum term payday loan at 36% of interest rate.So, interest rates differ significantly.

Moreover, debt risks are also managed with the help of legal regulation. For example, the number of loans a person can apply for per year is eight. In Virginia, loans ought tobe paid in two pay cycles. The states of Connecticut, Maryland, Massachusetts, Pennsylvania, Vermont, and West Virginia have never authorized payday loans.  The District of Columbia has cancelled its payday loan law.

The full package of information is available on federal websites dedicated to the topic of payday loans. Before deciding to resort to getting a payday loan, one should get acquainted with the main legislative laws, acts and norms in your state in order to choose the best option and to protect your rights.