Payday Loans in Massachusetts: What the 23% Small Loan Cap Allows

Not at payday prices. Payday lending isn't banned in Massachusetts, but a licensed lender can charge no more than 23% a year plus a $20 fee on a loan of $6,000 or less, so the Division of Banks calls a typical payday loan illegal.

Massachusetts Small Loans at 23% Plus $20, From $300 to $6,000

Worked out from Massachusetts law, not offers from lenders in our network; a lender can charge less. The APR treats the $20 fee as paid from the loan.

The fee weighs most on small, short loans, which is why the APR falls as the loan grows. A lender can charge it no more than once in any 12 months. Beyond it, only a few charges are allowed, such as public filing fees and the late and returned-payment charges below. The Division of Banks says payday loans average over 500% APR.

The 12% Line That Makes a Massachusetts Payday Loan Illegal

Anyone in the business of making loans of $6,000 or less needs a small loan license from the Division of Banks once interest and expenses top 12% a year, and licensees are held to the 23% rate order. The law reaches further than storefronts:

• Every charge counts. Interest, brokerage, commissions, service and extension fees all count toward the limit, even when paid to someone else the lender knew of.
• Online lenders count. If you apply from Massachusetts and the money comes from out of state, the law treats it as a Massachusetts loan.
• Brokers count. A company paid to arrange or help you get one of these loans is treated as being in the small loan business.
• Banks and credit unions. They don't need the license, but on loans of $6,000 or less they can't charge more than the same maximum.

Licensing rules updated on October 10, 2025 require a small loan company to show a net worth of at least $75,000 and file CPA-reviewed or audited financial statements.

Void Loans and the Attorney General's Online Title Lender Case

A loan made in violation of the small loan law by an unlicensed lender is void, and the lender faces up to 10 years in state prison or a $10,000 fine. If a licensed lender overcharges, a court can void the loan at your request, the Division can order a refund after a complaint, and you have two years from paying to sue for the excess.

In 2017 the Attorney General won a judgment voiding more than 200 loans from Liquidation, LLC, an unlicensed online auto title lender. Its sample loans of $700 to more than $9,000 carried rates of 181% to 619%, and most borrowers had applied online or by phone.

Late, Bounced or Paid Early: Massachusetts Small Loan Charges

• On a precomputed loan, a payment more than 10 days late can draw one default charge: 5% of the installment or $5, whichever is less.
• A returned check or payment can cost up to $10, if your agreement allows it.
• Pay a precomputed loan off early and you get a refund or credit of the unearned interest.
• One year after the final due date, the rate on anything still owed drops to 6% a year.

Requesting a Loan Under the Massachusetts Rate Order

1. Pick an amount and term you can repay. At the cap, $2,500 over 24 months is about $130.93 a month.
2. Submit one request through LendUp. Lenders in our network review it, and any offer shows the APR, payments and total cost before you sign.
3. Before you sign, confirm the lender's Massachusetts small loan license and that charges stay within 23% plus $20.

Checking a Division of Banks Small Loan License

1. Search by the company's legal name or NMLS number; the Division of Banks points borrowers here.
2. Look for an active Massachusetts small loan company license, and match the name to your offer.
3. Can't find it? Call the Division before you share bank details.

Division of Banks: (617) 956-1500 or toll-free (800) 495-2265, 9 a.m. to 4 p.m. weekdays, or file through its Consumer Complaints page. Attorney General's Consumer Hotline: (617) 727-8400.

Common Questions

Official Sources

← Browse all states