Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 24, 2012

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There are 12 states in the country where payday loans are completely banned, but there are many more in which the industry is restricted in some way or another. In fact, only six states have no cash advance interest ceiling whatsoever.

Those states that prohibit payday loans altogether are:

  • Arkansas
  • Arizona
  • Connecticut
  • Georgia
  • Maryland
  • Massachusetts
  • New Jersey
  • New York
  • Pennsylvania
  • North Carolina
  • Vermont
  • West Virginia

Since these states do not allow payday lenders to operate within their borders, even online lenders must not offer short-term financing opportunities to those residing within these locations.

On the other side of the spectrum, there are those states that don’t limit payday loan fees or interest at all. Those states include:

  • Delaware
  • Idaho
  • Nevada
  • South Dakota
  • Utah
  • Wisconsin

Some states currently operate with loopholes that lenders can use to avoid fee and interest caps. For instance, in Illinois, any financing taken out for over 120 days is exempt from interest caps. New Mexico limits payday loan fees, but has no limit on installment loan fees. And Virginia allows no cap on financing secured by car titles, according to the Consumer Federation of America.

All other states have payday loan laws that that limit their usage and lender practices in some way or another. Most of these limitations regard the amount of interest or fees that lenders may charge borrowers. Other limitations include the amount of times a borrower is permitted to “rollover” their financing.

When borrowers rollover payday loans, they essentially take out another loan to cover the cost of the previous loan’s principal and fee. Rollovers can become quite costly, and it is largely due to the rollover that consumer advocates speak out so vehemently against payday loans.