How much a typical consumer pays to borrow small amounts of money — and whether that person can likely afford to repay that loan within the allotted time — varies widely from state to state. These fluctuations result largely from whether government regulations limit the cost of small loans and require that loans must be repaid in affordable installments over a longer period of time.
To better understand how effectively each state protects payday loan consumers, The Pew Charitable Trusts conducted an analysis of the payday loan market and regulatory systems in all 50 states and Washington, DC. The results collected in this interactive table show the level of consumer protection in place, the most common payday loan product type, the average APR, and the average four-month cost of a $500 loan.
The research divided states into four groups based on their lending laws: few safeguards, some safeguards, reformed, and restrictive. States with few safeguards have loans with no meaningful protection to ensure affordable payments; APR over 250%; and one-time payment loans. The states with some safeguards charge below-average prices and offer limited protection against high costs or repeated borrowing because the payments are prohibitive. Reformed states have enacted sweeping laws that reduce payday loan costs, require loan repayments at affordable rates, and preserve consumer access to credit.
The 18 states and Washington, DC that fall into the restrictive category have strict laws that ban payday loans or set low interest rates. Payday lenders do not operate in these jurisdictions. The states are Arizona, Arkansas, Connecticut, Georgia, Illinois, Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Dakota, Vermont and West Virginia. You and Washington, DC are omitted from this interactive table.
Pew also released an issue brief with more details on payday loan costs and regulations in the 32 states where payday loans operate.
Primary data sources include state regulatory reports, state laws, and advertised product prices from the six largest payday loan chains in the United States. Pew researchers reviewed available state regulatory reports on loans issued by payday lenders to determine the most common type of payday loan in each state. For states that have not released relevant data in the past three years, Pew compared advertised product options and pricing information from the six largest payday loan chains in the US and used that information to calculate dollar costs and APR.
In states that effectively limit loans to less than $500, the dollar cost was based on the average maximum loan size offered. And for APR calculations for one-time payment payday loans, Pew researchers used the 14-day term, so the cost of a four-month loan is equivalent to eight payment cycles, or 112 days. In the case of installment loans, monthly installments were calculated based on a loan term of four months.