Payday lending has been permitted to licensed lenders in two
additional states in the United States. It was authorized by state
laws or regulations in thirty six states and the District of Columbia, since the Michigan law took effect June 1, 2006. Twelve states and two territories have not enacted payday loan authorizing legislation. In Maine supervised lenders can choose for a fee structure that permits limited payday lending, although Maine has not enacted industry legislation. Payday loans are small loans subject to state regulation. Traditionally states capped small loan rates at twenty four to forty eight percent annual interest and required installment repayment schedules for small loans. Many states also have criminal usury laws to protect consumers. For example, New York's criminal usury cap is twenty five percent annual interest.Payday loans are legal in states where legislatures exempted these lenders from small loan or usury caps. In states that repealed small loan rate caps or usury limits for licensed lenders, payday lenders are allowed to charge unlimited rates. Payday loans are prohibited by Small Loan Laws or Usury Caps Currently twelve states and two territories have small loan laws or usury caps that effectively prohibit payday lending at triple-digit interest rates. In Arkansas, the state Constitution caps rates at seventeen percent annual interest, but the legislature enacted a law that permits check cashers to make single payment loans based on check holding. The constitutionality of payday lending at triple-digit interest rates in Arkansas is being challenged in the courts.

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