Payday loans (also called paycheck advances or a payday advances) are short-term, high-cost loans, usually up to $500.  The loans are made to cash-strapped borrowers with the anticipation that they will be paid back on the borrower’s payday.  Typical fees for borrowing $100 range from $15 - $35. (A $15 fee on a $100 two-week loan results in an annual percentage rate of 390%.)  When borrowers don’t have the cash come payday, the loan gets flipped into a new loan, piling on more fees into a spiral of debt for the borrower.  

New York State has a 25% interest rate cap (usury law) on small loans so payday lending is illegal in New York.  For this reason, NY does not have the store fronts selling payday loans that exist in other states.  Lenders are increasingly making illegal payday loans to New Yorkers, however, through the internet and toll free telephone numbers.

For more information about the hazards of payday lending go to Center for Responsible Lending, Consumer Federation of America, or the National Consumer Law Center.

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