DURHAM, NC - The Center for Responsible Lending (CRL) released a new map today showing triple-digit annual interest rates for single-payment payday loans in 28 states across the nation, even as several states move to cap rates around 36% to stop predatory payday lending within their borders. 

The map shows annual interest rates ranging from 140% to 662% for states that still allow lenders to make payday loans of a few hundred dollars that are due in full on the borrower’s next payday, often in just two weeks.  

“We’ve seen some shifts in the financial marketplace in recent years, but unfortunately, many states still allow these very troublesome balloon payment payday loans carrying annual percentage rates that are simply unconscionable. The rates we see in any of these states dwarf the rates of safe and responsible credit products.” said Charla Rios, deputy director of research for CRL. “The high cost of these loans coupled with terms that create a long-term cycle of debt drain borrowers’ bank accounts over time. This cycle leaves them struggling to pay bills and to keep their bank accounts in the black. Some borrowers end up losing their bank accounts altogether. They may face wage garnishment or even bankruptcy.” 

Payday lenders target working people who may already be struggling financially due to low wages, and they typically locate in neighborhoods with higher concentrations of Black and Latino families, as shown in studies undertaken in multiple states and cities across the country. 

Nationally, the typical payday loan carries an annual interest rate of nearly 400%. CRL recommends that states pass a 36% cap on annual rates inclusive of fees as the most effective reform for stopping the payday lending debt trap. 

To date, 20 states and the District of Columbia have passed laws to cap payday lending rates around 36% APR, including fees, or requiring other measures to ensure that payday lenders do not impose interest rates and financing terms that create a long-term debt trap for consumers.  

Minnesota is the most recent state to pass major reform. Governor Tim Walz signed a bill in May that caps annual rates on payday loans at 36% inclusive of fees, with an allowance for loans with rates from 37% to 50% only when the lender meets stringent requirements for assessing the borrower’s ability to repay the loan given their income and other financial obligations. 

“We are optimistic that the Minnesota law will disrupt the predatory business model of payday lending in the state, which has seen payday lending averaging 220% in annual interest,” said Yasmin Farahi, deputy director of state policy at CRL. “This latest example of major payday lending reform is encouraging and the trend continues -- several other states are moving to stop the exploitation of their working families by taking up interest rate cap legislation. But we still have a long way to go to stamp out a practice that relies for its very existence on setting up borrowers to fail.” 

New research with map: Red Alert Rates: Annual Percentage Rates on $400, Single-Payment Payday Loans in the United States | Center for Responsible Lending


Media contact: carol.parish@responsiblelending.org