Are Payday Loans Legal in New York?

By: Robert J. Nahoum

A man in suit and tie with his arms crossed.


Many working people unfortunately live on the precipice of financial collapse.  A sudden medical issue, an unexpected auto repair or any other unforeseen expense could push a working family over the edge.  In a pinch, too many consumers in need of quick cash turn to cash advance loans to bridge the gap.

Also known as “Payday Loansâ€, cash advance loans are small, short-term loans with exceedingly high interest rates.  The loans are made with the anticipation of a future lump sum of cash or payment like a paycheck giving rise to the name “Payday loanâ€.  The payday loans are typically due in two weeks; however, because the borrower’s financial situation rarely improves in that short period of time, the loans are often rolled over into another two week loan.  Rollover of payday loans sets in motion a cycle of borrowing-rolling over-and borrowing while interest piles on at rates as high as 1000%.


New York State has recognized the destructive potential of Payday loans and has banned them in the state.  In New York, under General Obligations Law § 5-501 and Banking Law § 14-a, loans made by non-bank lenders, with an interest rate exceeding 16 percent per annum, constitute civil usury and are illegal.  Further, under New York Penal Law §§190.40-42, loans made in New York with an interest rate exceeding 25 percent per annum constitute criminal usury.

Because payday loans are illegal in New York, trying to collect on a payday loan is also illegal the state.  Federal debt collection laws called the Fair Debt Collection Practices Act (FDCPA), regulates the collection of consumer debts.  The FDCPA precludes third party debt collectors from using false, misleading, deceptive and harassing debt collection tactics.  Attempting to collect a payday loan in New York is a violation of the FDCPA.  If a debt collector violates the FDCPA, you can sue for statutory damages up to $1,000.00, plus actual damages (like pain and suffering) and your attorney’s fees.


If a debt collector is attempting to collect on payday loan, take a stand and fight back.  Such conduct is against the law and may be a violation FDCPA.  In FDCPA cases, The Law Offices of Robert J. Nahoum, P.C. doesn’t charge our clients a penny out of pocket.

If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.  With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.

The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202