American Online (WEB) Loans: Legal Status and Limitations
The following information condenses state regulations and statutes concerning payday loans and lending. Payday loans are characterized as a one-time payment, short term loans created with access to personal banking accounts.
Payday loans can be divided into three groups in regard to the state law type, restrictive states, hybrid states, and permissive states.
Restrictive states contain highly strict and firm rules when it comes to payday loans. These states implement firm regulations that prohibit the usage of short-term loans, in order to protect their citizens from the practice of payday loans. They often also set rate caps or limits ensuring that the lending does not take place. These states also forbid payday loan storefront creditors by state law. Restrictive payday lending laws are practiced in 16 states and the District of Columbia.
Some of these states include:
- Georgia which has prohibited the use of payday lending.
- New York and New Jersey have set caps and limitations upon the loan annual interest to be 25 percent and 30 percent, respectively.
- Arkansas, on the other hand, has set its loan rate to be at 17 percent annual interest.
The rest of the states are: New Hampshire, Montana, Colorado, South Dakota, Arizona, North Carolina, Connecticut, Maryland, Massachusetts, Pennsylvania, Vermont, West Virginia, and the District of Columbia.
Hybrid states assume certain rules and terms that payday lenders should follow. Small payday loans held by access to the debtor’s bank account are authorized in three states, however at a lower than usual annual rates. These states enforce key regulations upon these loans that allow a limited number of loans per borrower, as well as, permitting the debtor to have multiple repayment schedules instead of a one-time repayment.
These states are:
Maine imposed limitations to interest at 30 percent. Oregon enforces a one-month minimum payday loan term at a 36 percent annual interest. New Mexico imposed an annual interest cap at 175% with a minimum loan term of 120 days.
Permissive states are that allow payday lenders the ability to exercise their services fully. Lenders in these states have the right to set interest rates starting from 15 percent, and even higher APRs. Storefront creditors are also legally allowed within these states.
These states are:
Alabama, Alaska, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.