The Federal Landscape
While there is no single federal law capping payday loan interest rates, the CFPB enforces rules requiring lenders to assess borrowers' ability to repay. The Military Lending Act caps rates at 36% for active-duty service members, providing a model that consumer advocates want extended to all Americans.
States That Ban Payday Loans
As of 2026, 18 states plus D.C. effectively ban payday lending through rate caps of 36% APR or lower. These include New York, New Jersey, Connecticut, Massachusetts, Vermont, New Hampshire, Maryland, West Virginia, Montana, South Dakota, Colorado, Arizona, Arkansas, North Carolina, Georgia, Oregon, Maine, and Nebraska.
States With Strict Regulations
States like Ohio, Virginia, and Illinois have recently reformed their payday lending laws, capping rates and extending minimum repayment terms. Ohio's 2018 law caps rates at 28% APR and requires minimum 90-day loan terms. Virginia's 2020 reform caps interest at 36% APR with structured repayment plans.
High-Cost Payday States
States like Texas, Utah, Nevada, and Mississippi have few restrictions on payday lending. In Texas, payday lenders operate as Credit Service Organizations (CSOs), effectively sidestepping rate caps. Borrowers in these states may pay effective APRs exceeding 600%, making it critical to explore alternatives.
Online Lending Complications
Online payday lenders may operate from states with no rate caps or from tribal lands claiming sovereign immunity. The CFPB has taken enforcement action against illegal online lenders, but borrowers should verify any lender's state licensing before applying.
Your Rights as a Borrower
Federal law requires payday lenders to disclose the APR, total finance charges, and total repayment amount before you sign. You generally have the right to rescind a loan by the next business day. If a lender violates these rules, you may file complaints with your state attorney general and the CFPB.
How to Check Your State's Laws
Visit your state's banking or financial regulation department website for current payday loan rules. The CFPB also maintains a state-by-state guide. At MaboRates, we update our payday loan comparison tool to only show lenders compliant with your state's regulations.
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