LC-11 · Consumer
Triple-digit payday loans
Interest that would be a crime in another state
In ordinary words
A two-week loan with a $15 fee per $100 works out to an annual percentage rate around 400 percent. In states without a strict cap, that loan is a licensed product.
Why people call it a crime
People call it loan sharking. The sign on the storefront says it is licensed, and in that state it may be.
A scene, not a hypothetical statute
A $300 loan costs $45 for two weeks. The borrower rolls it. The fee repeats. The math is on the disclosure. In a no-cap state the disclosure is the permission slip.
In legal terms
Usury is state law. States such as South Dakota (before a 2016 voter cap) and others have allowed high-APR small-dollar credit; some still do, or allow tribal and bank-partnership models that export rates. The Military Lending Act caps many loans to active-duty service members at 36% MAPR. The CFPB’s payday rule has focused on underwriting and payment withdrawals more than a national rate cap. Marquette Nat’l Bank v. First of Omaha, 439 U.S. 299 (1978), lets national banks export home-state rates.
There is no general federal usury ceiling for consumer loans to civilians. A state that chooses not to cap rates has made the practice lawful inside its borders.
State usury and small-loan acts; 10 U.S.C. § 987 (Military Lending Act); 15 U.S.C. § 1601 et seq. (TILA).
Where it stops being legal
Lending without a required license, hiding the APR, debiting accounts after revocation, or using a sham bank partnership to evade a state cap can be unlawful. Threats and violence are crimes everywhere.