Payday lending is a high-cost loan product that is built on its ability to churn consumers through a cycle of debt, collecting fees for as long as possible. Fortunately, 15 states and the District of Columbia have made a definitive statement to prohibit high-cost payday loans by adopting interest rate caps of 36% or less. The experiences of consumers in payday-free states show that eliminating the payday debt trap brings a host of positive benefits. This report draws on years of research (including academic studies, surveys and focus group results) to outline and articulate the evidence from payday-free states.

The experiences of these states demonstrate:

  • State payday loan bans save consumers more than $2.2 billion annually in fees that would otherwise be paid to payday lenders.
  • Payday loan restrictions do not force consumers to use products that cause greater harm than payday loans. Borrowers in states without payday loans employ a variety of strategies to address a cash flow shortfall at a fraction of the cost of payday loans.
  • In addition to protecting consumers from the high costs of payday loans, state payday lending restrictions also help borrowers by preventing the long-term harms associated with these loans. These harms include: increased difficulty paying bills, delayed medical spending, involuntary bank account closure, higher likelihood of filing for bankruptcy, and decreased job performance.
  • Finally, there is broad public support for maintaining the rate caps in states that prevent the harms of the typical 400% payday loan, both from citizens at large and from former payday borrowers.