Payday Loan Laws
Payday Loan Interest-Rate Caps
The following states have enacted laws that render payday loans void if they exceed the usury limit:
- Minnesota, which caps interest rates for (a) written loan contracts at 8% absent applicability of another statute, Minn. Stat. § 334.01, subdiv. 1; and (b) consumer short-term loans at 21.75% APR, or the total of 33% a year on the part of the unpaid balance up to $1,125 and 19% a year on the part of the unpaid balance above $1,125. Minn. Stat. §47.59, subdiv. 3(a). Loans that exceed these rates are void and the borrower has no obligation to pay any amounts owing on them. Minn. Stat. §§ 334.03, 47.601, subdiv. 6(b);
- Arkansas, whose state constitution provides that all contracts with interest in excess of 17% “shall be void as to principal and interest . .. . “
- New Hampshire, which prohibits annual interest rates above 36% for loans of $1o,ooo or less. N.H. Rev. Stat. § 399-A:12(I). Loans that do not comply with those restrictions are void, and the lender has no right to collect any principal, charges, or recompense. N.H. Rev. Stat.§ 399- A:u(V);
- New York, which prohibits any person or corporation not licensed by the state of New York from “directly or indirectly charg[ing], tak[ing] 16 Case 1:15-cv-05211-CM Document 6 Filed 07/31/15 Page 17 of 32 or receiv[ing] any interest … at a rate exceeding” annual interest of 16% on covered loans. N.Y. Gen. Oblig. Law§ 5-501; N.Y. Banking Law 14-a(1). Loans that exceed the rate are void. N.Y. Gen. Oblig. Law§ 5-511; see also Szerdahelyi v. Harris, 490 N.E.2d 517, 522-23 (N.Y. 1986) C'[A] usurious transaction is void ab initio … . “);and North Carolina, which imposes a tiered set of interest-rates limits with a maximum of 30% on loans below $15,000 and repayable between 12 and 96 months. N.C. Gen. Stat. § 53-176(a). Loans that violate this provision are void, and the lender has no right to collect, receive, or retain any principal or charges. N.C. Gen. Stat. § 53-166(d).
- Colorado prohibits annual interest above 12% on unpaid balances for loans other than supervised loans. Colo. Rev. Stat. § 5-2-201(1). For supervised loans, Colorado prohibits a supervised lender from receiving a finance charge exceeding the equivalent of the greater of either of the following: (a) the total of 36% on unpaid balances of $1,000 or less, 21% on unpaid balances between $tooo.o1 and $3,000, and 15% on unpaid balances greater than $3,000, or (b) 21% per year on unpaid balances. Colo. Rev. Stat. § 5-2-201(2). Consumers are relieved of the obligation to pay any charge that exceeds these limits and are entitled to a refund from the lender or assignee for any excess amount that they paid. Colo. Rev. Stat. § 5-5-201(2).
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