• The United States has the largest payday lending industry in the world. 
  • Payday loans are legal in 36 states. 
  • The biggest states for payday lending are California, Texas and Nevada.

The payday market is thriving in the United States. Although regulations vary across the country, the United States is the world’s largest payday loan industry. In 2021 the industry has been valued at $11 billion but had skyrocketed to $46 billion in 2014. There are approximately 23,000 payday lenders in the US, including storefronts and online lenders. It is estimated that each year, approximately 12 million American’s take out a payday loan.

Payday loans took their place in the US market in 1993 and gained popularity throughout the 1990s. The initial short-term credit loan ‘Check Into Cash’ was founded by Cleveland businessman Allan Jones. In 1996 these short-term loans were legalized. The industry soon exploded, accumulating a valuation of $46 billion by 2014.

How are payday loans regulated?

Payday lending is regulated by the Consumer Financial Protection Bureau. President Obama introduced the legislation after the 2008 financial crisis. However, local governments can choose whether to legalize lending in their state. There are 16 states and the District of Columbia which implement caps on interest rates at 36%. 

There are also a set of requirements to make a loan request. These often include:

  • You must be a U.S. resident
  • You must be over the age of 18
  • You need steady employment and a stable income
  • You earn a minimum of $800 per month
  • You have a valid and working mobile phone account
  •  You have a live checking account for your loan to be deposited into
  • You can afford to meet repayments

Where are payday loans legal?

According to the CFPB, 32 states allow these types of lending without significant restrictions.  In these states, it’s not uncommon to find APRs exceeding 400 per cent. 

legality-aoyday-loans-state

Payday loan legality.

There are 12 states — Arizona, Arkansas, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, New Mexico, Pennsylvania, Vermont, and West Virginia — in which payday loans are entirely illegal. 

How can I tell if a payday lender is legally licensed in my state?

To find out if your payday lender is legal, check if they have a state-issued license. The license should be visible, either physically displayed at the storefront or as an image on the payday loan website. If you cannot see the license, ask the lender and they should be able to show you.

If you are still unsure, you can get the license verified with your state attorney general or financial regulations office.