Are Payday Loans Legal?

There's an old saying that goes "Just because you CAN do something, doesn't mean you SHOULD"….and that also holds true for the payday loan industry. These loans fall into the same murky category as things like gambling- they aren't legal everywhere. Some states regard it as a form of racketeering due to the loans' high interest rates and mandatory payment programs.

The legal status of payday loans is very unclear in Wisconsin; they are not technically legal but there is also no ceiling on the interest rate a lender can charge. Also, legislators in that state have passed laws that exempt low-principal loans, stripping consumers of most of their protections. Other states have either indirectly or directly outlawed payday loans- seven states and the District of Columbia have put caps on consumer loan interest rates, making it hard for the more usurious payday lenders to turn a profit and forcing them out.

Georgia's racketeering statutes specifically forbid payday loans. Statutes on interest rates and usury prevent the practice in Arkansas, New Jersey and New York. The loans have a special status in Oregon, Ohio, Maine and New Hampshire. All these states put limits on interest rates, offering consumers some level of protection.

There are thirty-five states in which payday loans have guaranteed legal status- if you are in one of these states and need quick cash, make sure to look for loopholes and read the fine print. To find out more about the status of payday loans where you live, ask the state loan regulator.