Payday Loans and Cash Advance in New York

Prohibited; 16% civil and 25% criminal usury caps. Below: the law, the limits, what $300 costs here, who regulates it, and how to request a cash advance online in New York.

Is a Cash Advance Legal in New York?

Payday loans are illegal in New York, and the Department of Financial Services (DFS) says so in as many words: it is a violation of state law to make them in person, by phone or over the internet, and it is illegal for a debt collector to try to collect one. The ban rests on the usury laws rather than a payday statute. General Obligations Law 5-501 and Banking Law 14-a make any loan under $250,000 at more than 16 percent a year civil usury when made by a non-bank lender or a New York-chartered bank. Penal Law 190.40 makes a loan above 25 percent a year criminal usury in the second degree, a class E felony. Banking Law 373 closes the storefront route by barring licensed check cashers from cashing or advancing money on a postdated check and from making loans at all. A two-week payday fee annualizes to many times either limit, which is why DFS treats every payday loan to a New Yorker as void and unenforceable. What is legal is small-dollar credit from banks, credit unions and lenders licensed under Article 9 of the Banking Law, all priced within the usury ceilings.

The governing law is New York General Obligations Law 5-501 and Banking Law 14-a (civil usury, 16 percent); Penal Law 190.40 (criminal usury, 25 percent); Banking Law 373 (check cashers); Banking Law 340 (licensed lenders) (N.Y. Gen. Oblig. Law 5-501; N.Y. Banking Law 14-a, 340, 373; N.Y. Penal Law 190.40).

Loan Limits and Terms in New York

New York's two ceilings do different jobs. The 16 percent civil limit governs what an ordinary lender can charge on a loan under $250,000, and a lender that wants to charge more than that on a loan of $25,000 or less to an individual must hold a license under Banking Law 340. The 25 percent limit in Penal Law 190.40 is a criminal line that applies to lenders generally; DFS states that loans to New Yorkers above it constitute criminal usury. A payday loan charging $15 per $100 for two weeks annualizes to almost 400 percent, far past both marks. Banking Law 373 adds the storefront ban: a licensed check casher may not cash or advance money on a postdated check and may not be in the business of making loans. DFS has enforced the ban against online lenders by ordering them to stop, by obtaining restitution, and by pushing banks and the ACH network to cut off illegal debits.

What a $300 Loan Costs in New York

Payday loans are prohibited, so this example prices a $300 loan at the criminal usury ceiling in Penal Law 190.40, the most any lender could charge a New Yorker without committing a felony. Interest for 14 days: $300 x 0.25 x 14 / 365 = $2.88, repaid as $302.88. APR = 2.88 / 300 x 365 / 14 = 0.25, or 25 percent. A lender without an Article 9 license is held to the 16 percent civil usury ceiling in General Obligations Law 5-501 and Banking Law 14-a, which would be $1.84 on the same loan.

Run your own numbers with the cash advance calculator.

Consumer Protections and Who to Call in New York

• A loan under $250,000 by a non-bank lender or a New York-chartered bank at more than 16 percent a year is civil usury and illegal (General Obligations Law 5-501; Banking Law 14-a).
• Charging more than 25 percent a year on a loan is criminal usury in the second degree, a class E felony (Penal Law 190.40).
• DFS states that payday loans made to New Yorkers are void and unenforceable, and that it is illegal for a debt collector to collect or attempt to collect on one.
• A licensed check casher may not cash or advance money on a postdated check and may not engage in the business of making loans, so no New York storefront can hold your check for a fee (Banking Law 373).
• Anyone making loans of $25,000 or less to individuals at more than the rate an unlicensed lender may charge must first obtain a license from the Superintendent of Financial Services (Banking Law 340).
• DFS accepts reports of payday loan offers at 800-342-3736 and complaints online at dfs.ny.gov/complaint, and it has used those reports to order online lenders to stop and to obtain restitution.
• The federal Military Lending Act caps consumer credit to active-duty service members and their dependents at a 36 percent all-in rate on top of New York's stricter limits.

Complaints and licence checks go to the New York State Department of Financial Services: 800-342-3736, www.dfs.ny.gov, or file a complaint at the regulator's complaint page. The federal CFPB also takes complaints about any lender.

Online vs Storefront Lenders in New York

Because Banking Law 373 keeps payday lending out of check-cashing storefronts, virtually every payday loan offered to a New Yorker comes through a website or a phone call. DFS has been explicit that internet payday lending is just as unlawful as payday lending made in person in New York, and it has acted on that view: it has sent cease-and-desist orders to online lenders, reached settlements that returned money to consumers, asked the ACH network to cut off illegal payday debits, and built a database of known illegal lenders that large banks use to block payments. The lenders that persist are based in other states or claim tribal immunity, and they charge fees that annualize to several hundred percent. DFS treats those loans as void, which means a collector cannot lawfully pursue you for them, and it tells residents to report any payday offer, whether or not they took the loan. Before dealing with any online lender, check whether it holds a DFS license; a lender that does not is charging a rate New York considers criminal.

Alternatives If a Payday Loan Is Not the Right Fit

The legal small-dollar options in New York are the ones priced inside the usury ceilings. Banks and credit unions lend under their charters, and federal credit unions can offer Payday Alternative Loans under federal rules. Lenders licensed under Article 9 of the Banking Law may make loans of $25,000 or less at rates above 16 percent but still within the criminal limit. A credit card cash advance is cheaper than any payday loan. New York City's Department of Consumer and Worker Protection points residents to employer advances, credit union loans and the Human Resources Administration's emergency cash, medical and food assistance, reachable through 311, and to free financial counseling at NYC Financial Empowerment Centers. Outside the city, county social services offices handle emergency assistance and HEAP, and NY 2-1-1 connects callers with local help. Asking the creditor for a payment plan before the due date is usually cheaper than any loan.

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

Frequently Asked Questions

Nearby States

• VermontThe fee cap, a worked example and the regulator to call in Vermont.
• MassachusettsThe fee cap, a worked example and the regulator to call in Massachusetts.
• ConnecticutThe fee cap, a worked example and the regulator to call in Connecticut.
• New JerseyThe fee cap, a worked example and the regulator to call in New Jersey.
• PennsylvaniaThe fee cap, a worked example and the regulator to call in Pennsylvania.