Are Payday Loans Legal?

The short answer to that pressing question is yes, payday loans are legal. However, more and more, the regulation of lending institutions that are dealing strictly in payday loans are handled by individual states, as opposed to a country wide regulation. Presently in 37 states the payday loans are regulated. In 13 states payday loans are banned, but even when they are not, they are usually given very hard rate capes calculated by strict APR’s.

Basically certain states are taking it upon themselves to allow or in some cases ban payday loans. Recently the U.S. Congress allowed a provision on payday loans that would require certain payday loans, such as the military payday loans to be capped at a certain percentage rate; 36%. That doesn’t bode well for some payday loan companies, and they are trying to change military payday loans to everyday payday loans that would still allow military personnel to take part in a payday loan.

Payday loans are trying to find a way around the states that are banned as well, by forming relationships with banks that are founded in a different state. Delaware in particular is a major state that will work with payday loan companies in the banned states because they have no cap on APR’s and are relatively unregulated. This is more commonly referred to as “rent-a-bank”.

Some states that do not ban them entirely, have a law limiting the number of loans that a borrower can take at any given time. Some even ban the amount of