In 37 states in the country payday loans are not an unusual thing to see, but in the remaining 13 states it is against the law. It is illegal to make payday loans in Arizona, Arkansas, Connecticut, Georgia, Maryland, Maine, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Vermont, and West Virginia. The states that have outlawed payday loans have not per say banned payday loans but have made it illegal through a usury limit. A usury limit is a hard interest rate cap that is calculated strictly by the annual percentage rate (APR). Finance charges are usually a flat fee of about $15 per $100 loaned which is about 30 percent for a two-week period which translates to an APR of about 780 percent. In order to keep payday loans illegal the state must make sure they include the fees and APR in the usury limit, otherwise a payday loan place could stay under the usury limit with the APR and charge as much as they want for fees.
Some payday places are getting around the law by setting up a relationship with a big bank that has its home base in a state that does not have a usury law. Congress has also made it illegal for payday lenders to give a loan to a member of the armed forces with an APR over 36 Percent. North Carolina is the only state that makes illegal for payday lending places to do this. For more than 100 years Georgia law prohibited payday lending, but the state was not successful in complete breakdown of the industry until they made it a felony offense. In Georgia lenders are not permitted to give a loan for less than $3000 with and APR no larger than 16 percent.
Most people do not make close to $3000 a pay check therefore this law rules out payday lenders giving a loan to anyone. New Mexico caps fees and makes it illegal for a customer to take out a new loan to pay off an old loan. New Mexico also has a new law that if a customer cannot pay back a loan they are put on a 130 day payment plan with no interest and no fees. Once they pay that loan back they cannot take out another one for 10 days. Arizona has an operation called operation sunset that targets payday lenders who exceed the state cap of 36 percent on a loan. Consumer activist are fighting to have payday lenders banned in all states. They claim it is not right for the lenders to charge so much APR and that this usually ends with the consumer taking out more loans to cover the first loan and resulting in a out of control financial spiral.