Payday Loans and Cash Advance in Massachusetts

Prohibited, 23% small loan cap. Below: the law, the limits, what $300 costs here, who regulates it, and how to request a cash advance online in Massachusetts.

Is a Cash Advance Legal in Massachusetts?

Payday loans are not legal in Massachusetts. The state has no payday lending statute, and its small loan law makes the product impossible to offer at payday prices. Under M.G.L. c. 140, s. 96, any company that makes a consumer loan of $6,000 or less at more than 12% a year must be licensed as a small loan company by the Division of Banks. The Small Loans Regulatory Board's rate order, published in 209 CMR 26.00, then caps what a licensee can charge at 23% per year on the unpaid balance plus a single $20 administrative fee, which may be collected only once in any 12-month period. Above that sits the criminal usury statute, M.G.L. c. 271, s. 49, which makes it a crime to charge more than 20% a year unless the lender has notified the Attorney General. The Division of Banks has sent hundreds of cease letters to payday lenders that solicited Massachusetts residents, has warned consumers about tribal lenders claiming immunity from state law, and has told debt collectors that illegal loans cannot be collected. A resident who needs a few hundred dollars can get a licensed small loan at 23% plus $20, a credit union loan, or an employer advance, but not a payday loan from a store or a website.

The governing law is Massachusetts Small Loan Act and Small Loans Regulatory Board rate order; criminal usury statute (M.G.L. c. 140, ss. 96 to 114; 209 CMR 26.00; M.G.L. c. 271, s. 49).

Loan Limits and Terms in Massachusetts

Massachusetts regulates by rate. A lender that wants to charge more than 12% a year on a loan of $6,000 or less needs a small loan company license from the Division of Banks, and once licensed it is bound by the Small Loans Regulatory Board's rate order: 23% per year calculated by the actuarial method on the unpaid balance, plus one $20 administrative fee that cannot be charged to the same borrower more than once in 12 months. There is no room for a $15 per $100 two-week fee inside those numbers, which is why the Division does not license payday lenders. The criminal usury statute adds a second layer, making rates above 20% a crime unless the lender has filed a notice with the Attorney General, which licensed small loan companies do. The Division has used cease letters and enforcement actions against online lenders, and has told collectors that loans made in violation of the small loan law are not collectible.

What a $300 Loan Costs in Massachusetts

There is no legal payday loan in Massachusetts, so this shows a licensed small loan at the 209 CMR 26.00 ceiling. Interest at 23% for 14 days is 300 x 0.23 x 14 / 365 = $2.65, and the lender may add the $20 administrative fee once in any 12-month period, for a total charge of $22.65 and repayment of $322.65. APR = 22.65 / 300 x 365 / 14 = 1.97, or about 197%, because the flat $20 fee dominates a two-week term; on the same loan repaid over six months the fee spreads out and the APR falls to about 36%. Without the fee the rate is 23%.

Run your own numbers with the cash advance calculator.

Consumer Protections and Who to Call in Massachusetts

• Any company making consumer loans of $6,000 or less at more than 12% a year must hold a small loan company license from the Division of Banks under M.G.L. c. 140, s. 96, and the Division publishes licensee information so you can check a lender before you borrow.
• A licensed small loan company may charge no more than 23% per year on the unpaid balance plus a single $20 administrative fee, and that fee may not be assessed to the same borrower more than once in any 12-month period under 209 CMR 26.00.
• Charging more than 20% a year is criminal usury under M.G.L. c. 271, s. 49 unless the lender has filed a notice with the Attorney General, which puts unlicensed payday lenders on the wrong side of the criminal law as well as the licensing law.
• The Division of Banks has issued hundreds of cease letters to payday lenders that solicited Massachusetts residents, and has told debt collectors in an industry letter that loans made in violation of the small loan law may not be collected.
• The Division has published a consumer alert on payday loans from tribal lenders, warning that a claim of tribal affiliation does not make an unlicensed high-rate loan legal for a Massachusetts borrower.
• Consumers can reach the Division's consumer hotline at 800-495-2265 or 617-956-1500, and can file a complaint against any lender through the Division's consumer financial complaint page.
• Active duty service members and their dependents are separately protected by the federal Military Lending Act, which caps the total cost of consumer credit at 36% APR nationwide.

Complaints and licence checks go to the Massachusetts Division of Banks: 800-495-2265, www.mass.gov/orgs/division-of-banks, or file a complaint at the regulator's complaint page. The federal CFPB also takes complaints about any lender.

Online vs Storefront Lenders in Massachusetts

Massachusetts has no payday storefronts because the Division of Banks does not license the product. The problem is online: lenders based in other states or affiliated with tribes continue to advertise two-week and short-term installment loans at payday rates to Massachusetts residents, often debiting bank accounts directly. The Division's position is that any lender making loans of $6,000 or less at more than 12% to a Massachusetts consumer needs a small loan license and is bound by the 23% plus $20 rate order regardless of where it is based, and it has backed that up with hundreds of cease letters and enforcement actions. Some lenders complied by leaving the state; others closed. The Division's consumer alert on tribal lenders warns that a tribal name on the loan does not exempt the lender from state law, and its industry letter to debt collectors states that loans made in violation of the small loan law are not collectible. If an online lender is drawing on your account, gather the agreement and bank records and file a complaint with the Division at 800-495-2265 or through its online form; the Consumer Financial Protection Bureau and the Federal Trade Commission also accept complaints against tribal and out-of-state lenders.

Alternatives If a Payday Loan Is Not the Right Fit

The legal small-dollar product in Massachusetts is a small loan from a company licensed by the Division of Banks, capped at 23% a year plus a single $20 administrative fee and repaid in installments. Banks and credit unions lend within the same usury framework, and federal credit unions may offer payday alternative loans of $200 to $2,000 at no more than 28% APR under National Credit Union Administration rules; many Massachusetts credit unions run their own emergency loan programs for members. Some employers offer earned wage access or a payroll advance without a finance charge. For a heating bill, rent, or food emergency, Mass 211, local community action agencies, the Low-Income Home Energy Assistance Program, and the Residential Assistance for Families in Transition program connect residents with help that does not have to be repaid. A hardship arrangement with the creditor you owe is usually free, and a credit card cash advance, while not cheap, costs a fraction of what an illegal online payday loan would.

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

Frequently Asked Questions

Nearby States

• New HampshireThe fee cap, a worked example and the regulator to call in New Hampshire.
• VermontThe fee cap, a worked example and the regulator to call in Vermont.
• New YorkThe fee cap, a worked example and the regulator to call in New York.
• ConnecticutThe fee cap, a worked example and the regulator to call in Connecticut.
• Rhode IslandThe fee cap, a worked example and the regulator to call in Rhode Island.