Payday Loans and Cash Advance in Montana

Capped at 36% APR, no licensed lenders. Below: the law, the limits, what $300 costs here, who regulates it, and how to request a cash advance online in Montana.

Is a Cash Advance Legal in Montana?

Payday loans, which Montana law calls deferred deposit loans, are legal on paper but do not exist in practice. The Montana Deferred Deposit Loan Act (Mont. Code Ann. 31-1-701 through 31-1-729) still licenses lenders who hold a borrower's check and advance cash against it. What changed is the price. Voters passed Initiative 164 in November 2010, and for loans made on or after January 1, 2011, a licensee may not charge more than 36% per year on a deferred deposit loan. The same 36% ceiling was written into the Consumer Loan Act and the Title Loan Act at the same time. A $300 loan at that rate earns a lender about four dollars over two weeks, which is not enough to run a storefront, so the industry left. The Division of Banking and Financial Institutions states plainly that there are currently no licensed deferred deposit lenders in Montana. For a borrower this means two things. First, any lender offering a two-week loan at $15 or $20 per $100 is breaking Montana law, whether it operates from a storefront, a website or an app. Second, small-dollar credit in Montana comes through consumer loan licensees, banks and credit unions, all of them subject to the same 36% cap.

The governing law is Montana Deferred Deposit Loan Act (Mont. Code Ann. 31-1-701 through 31-1-729; 36% cap in 31-1-722).

Loan Limits and Terms in Montana

The Act limits a deferred deposit loan to $300 in principal, sets a 31-day maximum term and bars renewals and extensions outright. Because every fee is folded into the 36% annual ceiling, the old flat fee per $100 no longer exists; the charge is simply interest for the days the money is out. The only add-on the statute allows is a single fee of up to $30 if the borrower's check or electronic debit bounces, and that fee is the lender's exclusive charge for late payment. A lender may not lend more than 25% of the borrower's monthly net income, may not hold more than one loan per consumer, and may not fund a new loan with proceeds of another deferred deposit loan. Today these rules serve mainly as the yardstick for spotting an illegal offer.

What a $300 Loan Costs in Montana

Montana caps every charge on a deferred deposit loan at 36% per year (Mont. Code Ann. 31-1-722), so the fee is plain interest for the days borrowed. For $300 over 14 days: 300 x 0.36 x 14 / 365 = $4.14. Checking the APR the other way: 4.14 / 300 x 365 / 14 = 0.36, or 36%. The borrower repays $304.14. A consumer loan under Mont. Code Ann. 32-5-301 carries the same 36% ceiling, so the arithmetic is identical for the products actually on offer in the state.

Run your own numbers with the cash advance calculator.

Consumer Protections and Who to Call in Montana

• Every deferred deposit lender must hold a license from the Division of Banking and Financial Institutions, issued through the Nationwide Multistate Licensing System, and operating without one is a prohibited act under Mont. Code Ann. 31-1-723.
• All charges are capped at 36% per year under Mont. Code Ann. 31-1-722; the only extra is one fee of up to $30 for a bounced check or failed debit, collected once no matter how many times the item is redeposited.
• You can cancel a deferred deposit loan by the end of the lender's next business day by returning 100% of the amount borrowed in cash or certified funds, with no fee or interest owed (Mont. Code Ann. 31-1-715).
• The loan agreement must state, in at least 14-point bold type right above your signature, that you cannot be prosecuted in criminal court for collection of the loan (Mont. Code Ann. 31-1-721), and using criminal process to collect is a prohibited act.
• A lender may not lend you more than 25% of your monthly net income, may not have more than one loan outstanding with you, and may not roll a loan over using proceeds from another deferred deposit loan (Mont. Code Ann. 31-1-723).
• Contracts may not include a confession of judgment, a jury trial waiver or a wage assignment, and the lender may not take collateral beyond your check or debit authorization (Mont. Code Ann. 31-1-723).
• Active-duty service members and their dependents are covered by the federal Military Lending Act, which caps the military annual percentage rate on payday and most consumer loans at 36% nationwide.

Complaints and licence checks go to the Montana Division of Banking and Financial Institutions: 406-841-2920, doa.mt.gov/BFID, or file a complaint at the regulator's complaint page. The federal CFPB also takes complaints about any lender.

Online vs Storefront Lenders in Montana

An online lender that wants to make deferred deposit loans to Montana residents needs the same state license as a storefront, and the Division licenses through the Nationwide Multistate Licensing System, where you can check any company's status. Since no company currently holds that license, every website or app offering Montanans a classic two-week payday loan at triple-digit rates is operating outside state law. Some of these lenders claim they are exempt because they are based in another state or affiliated with a tribe. The Division only handles complaints against companies it regulates; for anything else it points consumers to the Consumer Financial Protection Bureau or the Montana Department of Justice, which enforces the state's consumer protection law. Practical advice: before you sign anything online, search the lender in NMLS Consumer Access, confirm the APR in the Truth in Lending box is 36% or lower, and walk away from any offer that asks for a fee up front or refuses to show the APR.

Alternatives If a Payday Loan Is Not the Right Fit

The legal small-dollar product in Montana is a consumer loan from a licensee under the Montana Consumer Loan Act. Mont. Code Ann. 32-5-301 caps interest at 36% a year and spells out the only extra fees allowed, such as a deferral or past-due fee of the greater of $15 or 5% of the amount due, never more than $50 and charged only once per default. These loans are usually repaid in installments over several months, which keeps each payment small. Credit unions offer payday alternative loans under federal rules, and many Montana banks and credit unions have their own small emergency loans. Beyond loans, ask your employer about a pay advance, contact local assistance programs for help with utility, rent or food costs, and ask the creditor you are trying to pay whether it offers a payment plan. A credit card cash advance is expensive but still far cheaper than an illegal online payday loan.

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

Frequently Asked Questions

Nearby States

• IdahoThe fee cap, a worked example and the regulator to call in Idaho.
• WyomingThe fee cap, a worked example and the regulator to call in Wyoming.
• South DakotaThe fee cap, a worked example and the regulator to call in South Dakota.
• North DakotaThe fee cap, a worked example and the regulator to call in North Dakota.