Payday Loans Are Illegal in New Jersey: What You Can Borrow Instead

No. Payday loans are illegal in New Jersey because their rates break the state's 30% criminal usury limit for individual borrowers. Instead, consumer lenders licensed by the Department of Banking and Insurance (DOBI) make installment loans of up to $50,000, at no more than that 30%.

What a New Jersey Consumer Loan Costs at 30%

Worked out from New Jersey's 30% limit, not offers from lenders in our network; a lender can charge less.

That ceiling binds DOBI-licensed consumer lenders: state rules bar every licensee from charging more than the criminal usury rate. DOBI says the limit covers loans subject to New Jersey law, but federal law overrides state usury rules for some lenders: banks and other financial institutions may lend up to the criminal limit, and some, such as federally funded mortgage companies, aren't subject to New Jersey's caps. Check the APR on any offer.

Why Payday Loans Break New Jersey's Usury Laws

New Jersey has two usury limits. The civil limit is 6% a year without a written agreement and 16% with one. The criminal limit is 30% a year for individuals and 50% for corporations. Licensed consumer lenders may charge more than the civil rate, but not more than the criminal rate.

At 30% a year, $300 for 14 days carries $3.45 in interest. A typical payday fee of $15 per $100 would be $45 on the same loan, almost 400% APR by the CFPB's count, and DOBI has warned of payday rates of 500% a year or more.

Online Payday Offers and DOBI Enforcement

DOBI says payday lending is practiced almost entirely by out-of-state or foreign companies without a New Jersey license. Few run storefronts here; the risk comes from internet lenders outside the state.

• Penalties for online lenders. In June 2024, DOBI fined Western Sky Financial, CashCall and related companies $450,000 for usury and unlicensed lending. They had already paid $14.5 million in restitution to New Jersey consumers.
• No ads without a license. An unlicensed, non-exempt company can't advertise or solicit consumer loans here in any medium.

How a Licensed New Jersey Consumer Loan Works

• Loans of $50,000 or less for personal, family or household use, repaid in substantially equal monthly payments (variable-rate loans aside).
• Interest figured on actual days (365/365) or 30-day months (360/360), and only fees the Consumer Finance Licensing Act permits.
• Pay off at any time with no penalty, and get a copy of every document you're asked to sign.
• No New Jersey office is required, so online lenders can hold the license.

Three Steps to a Licensed New Jersey Loan

1. Decide how much you need and how long you need to repay it; licensed consumer loans go up to $50,000.
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. If the lender is DOBI-licensed, interest can't go above 30% a year for an individual borrower, New Jersey's criminal usury rate.
3. Check the lender's Consumer Lender license in DOBI's Licensee Search, and turn down anything described as a payday loan.

Find the Lender in DOBI's Licensee Search

1. Open the NJDOBI Licensee Search and choose Banking.
2. Search the company's name for an active Consumer Lender license; the search lists only active licensees.
3. Match the name and address to your offer. Banks and credit unions aren't in this search.

Call DOBI at 609-292-7272 or 1-800-446-7467, or file a complaint online or by mail to NJDOBI, PO Box 471, Trenton, NJ 08625-0471. DOBI can fine a licensee up to $25,000 per violation.

Common Questions

Official Sources

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