Usury Laws and Usury Caps

Short term payday loans are small unsecured loans that are provided to a loan seekers for a shorter duration in order to cover their immediate expenses under exorbitant rate of interest, sometimes exceeding 391% of Annual percentage rate. At the present moment the popularity of payday Loan Companies is so good that in some places they are easy to find through online in a town where you live than any other store. In additional, not all the payday lenders are decent and many, in fact, get good interest on unhappy borrowers. Many Loan Companies practice usury. This is the main cause a lot of states have implemented usury laws in order to protect the borrowers.


The term of usury actually means taking cash advance at exceedingly exorbitant interest rates and it comes from Latin, where it exactly stood for huge interest fees.

Usury has got longer history than one can actually want. The notes about such unfair lending practices can be found in the torah, the new testament, and the Quran and they are referred as charging any interest on a loan; and all these means strongly disapproved the thinking. From the religious concept usury has become a more common term and now a days it is the practice of charging excessive interest on loan amount. This is exactly what many payday Loan companies do at the time.

In USA good deal of attention is paid to this very subject. With such a number of short-term Loan Companies existing and popping up, it makes sense to restrict the usury efforts. The 1st laws concerning usury in the USA appeared in 1965 and they have been updated and restricted since. But, right now there is a many states that has set usury cap on payday cash loans and short-term Loan Companies there has to comply with it.

US Laws

Usury laws differ from state to state in regards to the limit of Annual Percentage Rate. There are states that allow payday Loan Companies more freedom and there are states with every strict act.

There are many act that control payday lending and one of them is the federal Truth in lending law (TILA). This document commits all the short-term Loan Companies to disclose all the lending agreement particulars to a borrower. This presupposes charges and interest fees, which should be in accordance to the state act.

There are 38 states that allow payday lending authorized by special regulations that refer to maximum loan amount and time duration as well policy of charges and penalties allowed for practice by payday Loan Companies. States statues provisions also set the limits of interest fees that can be charged. In additional, amount them there are states which policy is more lenient and there are no limits to annual interest rates there for example in South Dakota.

In some states no usury caps in Arkansas, North Carolina, Arizona, Georgia and the District of Columbia. Predatory payday cash loan is prohibited here at all.