Payday Loans and Cash Advance in Maryland

No payday loans; 33% rate cap. Below: the law, the limits, what $300 costs here, who regulates it, and how to request a cash advance online in Maryland.

Is a Cash Advance Legal in Maryland?

Maryland has no payday loan statute, and that is the whole story. Any loan of $25,000 or less made for personal, family or household purposes falls under the Maryland Consumer Loan Law in the Commercial Law Article, Title 12, Subtitle 3. That law caps interest at 2.75 percent a month on the first $1,000 of a loan of $2,000 or less, and 2 percent a month on the rest, which works out to a 33 percent annual rate at the top tier. A typical two-week payday loan charging $15 per $100 runs close to 400 percent a year, so no licensed lender can offer one here. The Office of Financial Regulation, which licenses consumer lenders, tells residents that the state rate limits apply to any short-term, high-interest loan sold as a cash advance. Because Commercial Law 12-314 makes an over-rate or unlicensed loan void and unenforceable, a lender that charged payday-style fees could not even collect the principal. For a borrower that means a storefront payday loan does not exist in Maryland, an online offer at triple-digit rates is almost certainly illegal, and the legal options are small installment loans at 33 percent or less, credit union loans and employer or nonprofit help.

The governing law is Maryland Consumer Loan Law, Commercial Law Article, Title 12, Subtitle 3 (Md. Code Ann., Com. Law 12-303, 12-306, 12-314; Fin. Inst. 11-201 et seq.).

Loan Limits and Terms in Maryland

The Consumer Loan Law does not describe a product; it sets a price ceiling for everything under $25,000. A licensed lender may charge 2.75 percent a month (33 percent a year) on the first $1,000 and 2 percent a month (24 percent a year) on the balance above $1,000, and only on the unpaid principal actually outstanding. Interest cannot be charged in advance or compounded. When a loan is refinanced, the lender may fold in no more than 60 days of interest that is already due. There is no cap on the number of loans, no cooling-off period and no database, because the rate cap itself does the work. Lenders must hold a Maryland consumer lender license from the Commissioner of Financial Regulation, and Financial Institutions Article 11-204 only lets them take applications at a licensed location.

What a $300 Loan Costs in Maryland

Maryland allows 2.75 percent a month on the first $1,000 of a small loan, a 33 percent annual rate. Interest on $300 for 14 days at that rate is 300 x 0.33 x 14 / 365 = $3.80. Checking the APR the other way: 3.80 / 300 x 365 / 14 = 0.33, or 33 percent. A real Maryland consumer loan is repaid in monthly installments over several months, and $300 borrowed for a full month costs $8.25 in interest at the same rate. No lender may add a payday-style flat fee on top.

Run your own numbers with the cash advance calculator.

Consumer Protections and Who to Call in Maryland

• Any lender making consumer loans of $25,000 or less must hold a license from the Commissioner of Financial Regulation, and Financial Institutions Article 11-204 bars taking applications or signing loan contracts anywhere but a licensed location.
• Interest is capped at 2.75 percent a month on the first $1,000 and 2 percent a month above that for loans of $2,000 or less, computed only on the unpaid principal balance (Commercial Law 12-306).
• A loan that charges more than the legal rate, or that comes from a lender without a Maryland license, is void and unenforceable: the lender may not collect principal, interest or fees (Commercial Law 12-314).
• Lenders may not charge interest in advance or compound it, and a refinance may not add more than 60 days of interest already due to the new principal balance (Commercial Law 12-306).
• The Office of Financial Regulation logs every written complaint, assigns a financial examiner who contacts the lender, and mails or emails the borrower a closing letter when the case is resolved.
• The Office of Financial Regulation points residents to the NMLS Consumer Access lookup so they can confirm a lender is licensed before they sign, and tells them that most consumer lenders must be licensed.

Complaints and licence checks go to the Maryland Office of Financial Regulation: 410-230-6077, www.labor.maryland.gov/finance, or file a complaint at the regulator's complaint page. The federal CFPB also takes complaints about any lender.

Online vs Storefront Lenders in Maryland

The rate cap follows the borrower, not the storefront. An online lender that makes a consumer loan to a Maryland resident needs the same Maryland license and must stay under the same 33 percent ceiling, whether it sits in Baltimore, another state or overseas. The Office of Financial Regulation tells residents that most consumer lenders must be licensed and points them to the NMLS Consumer Access lookup to check before signing anything. Offers that promise a same-day cash advance at a flat fee per $100 are the ones to walk away from: under Commercial Law 12-314 a loan from an unlicensed lender, or one that charges more than the law allows, is void, and the lender cannot collect it through the courts. Some lenders claim tribal affiliation or an out-of-state charter to get around the cap. The Office of Financial Regulation asks residents to report those offers rather than pay them, and it takes complaints against the collectors who keep calling as well as the original lender.

Alternatives If a Payday Loan Is Not the Right Fit

The legal product for small amounts in Maryland is a consumer loan from a licensed lender at no more than 33 percent a year, usually repaid in monthly installments. Credit unions offer the closest thing to a fast small loan: many federal credit unions make Payday Alternative Loans, a product with a capped rate and a small application fee that is open to members after a short waiting period. Other options include a bank or credit union overdraft line, an advance on wages from your employer, a payment plan negotiated directly with the utility, landlord or clinic you owe, and local emergency assistance programs. The Office of Financial Regulation suggests shopping for the lowest-cost credit, contacting a credit union or bank, negotiating with creditors and getting help from a nonprofit debt management service before taking on new debt. If money is needed the same day, a credit card cash advance or a pawn loan, which Maryland regulates separately, will almost always cost less than an illegal online payday loan.

Compare the installment loan and payday alternative loan options before you decide.

Frequently Asked Questions

Nearby States

• PennsylvaniaThe fee cap, a worked example and the regulator to call in Pennsylvania.
• DelawareThe fee cap, a worked example and the regulator to call in Delaware.
• VirginiaThe fee cap, a worked example and the regulator to call in Virginia.
• West VirginiaThe fee cap, a worked example and the regulator to call in West Virginia.
• District of ColumbiaThe fee cap, a worked example and the regulator to call in District of Columbia.