<$17.65 for $100
Payday lending is legal in Hawaii.
Hawaii imposes a $600 amount limit on payday loans offered in the state. Payday loans can be taken for the period not exceeding 32 days. Finance rates allowed in the state should not exceed 15% of the amount advanced. No roll-overs are allowed, one loan at a time. Criminal actions are prohibited.
Although these loans are expensive in terms of interest rates, in situations of urgent need of money they are still posed as an effective solution to a problem. All the residents of Hawaii are eligible to apply for payday loans and, unfortunately, many of them still resort to this high-interest practice nowadays.
Hawaii payday lending history dates back to 1999 when such loans were first legalized. There hasn’t been much change in the laws that govern the industry since that time. Many times the question of the state’s ineffective payday lending regulation was raised, and there were many attempts to cap the loans at 36$ APR, however, to no effect so far. The most recent attempt of the sort was made by the Legislature in 2017, it failed as all the previous bills before it.
Hawaii Payday Lending Statutes
In the state of Hawaii, payday lending is considered legal in case it refers to check cashing businesses.
26 Hawaii Rev. Stat. Ann. § 480F-1 et seq. is an official law that regulates all the issues of payday lending. According to the statute, a payday loan is officially called a “deferred deposit” transaction.
Hawaii payday loans represent small loans that a borrower has to repay with his paycheck in due time, generally, it is two weeks. Such loans refer to the category of unsecured ones and are not large in amount. In order to get such a loan, a person is required to be permanently employed or rather have a reliable and verified income source. Finance charges for such loans are expressed in dollars.
The only payday lending businesses that are allowed to operate in the state of Hawaii are the check-cashing ones. All the rest are considered illegal.
Loan Amount in Hawaii
- A person is allowed to get one loan up to $600 at a time.
- No additional loans are allowed until the previous one is repaid.
Rates, fees and other charges in Hawaii
- “A check casher may charge a fee for deferred deposit of a personal check in an amount not to exceed 15 percent of the face amount of the check.”
- Finance charges for a $100 loan given for a period of two weeks cannot exceed $17.65.
Real APR for payday loans in Hawaii can reach 460% (*According to the Center for Responsible Lending 2019: “Typical APR based on
Maximum term for a payday in Hawaii
- A person is allowed to get one loan for a period of no more than 32 days.
- Rollovers are not allowed; the loan should be repaid in due time.
- According to the state law, one NSF collection fee not exceeding $20 can be charged.
- A lender is prohibited to take any criminal action against a borrower in case they are unable to repay in time. Exclusions are made when a person closes the account before the loan is repaid or orders the bank to terminate the repayment and does it purposefully.
In the state of Hawaii, it is the Hawaii Department of Commerce and Consumer Affairs that is in charge of all the issues connected with payday lending. All the questions and complaints should be addressed there.
The History of Payday Loans in Hawaii
- 1999 – First payday lending laws appeared in Hawaii, when the Legislature passed the Check Cashing Act (Act 146, Chapter 480F, Hawaii Reversed Statute) that exempted payday lenders from the necessity to comply with 24% usury cap. Payday lenders got an official name of “deferred deposits” lenders and started operating in the state.
- 2001 – Act 20, Hawaii Reversed Statute, Chapter 480F – the amendment that removed sunset date from the Act.
- 2003 – Act 222, Hawaii Reversed Statute, Chapter 480F – the amendment that limited the loan term to 32 days and increased maximum loan amount to $600.
- 2006 – The Military Lending Act effectively capped payday loans offered to the military at 36% APR. This federal law has no exceptions, thus, no lender in Hawaii is now allowed to offer loans to the military at the excess of 36% APR.
- 2015 – HB 744 was introduced. It was supposed to place a cap on the interest that a check casher could charge for a deferred deposit loan at 36% APR. The final bill failed to come out of the committee.
- 2016 – HB 2608 was introduced as a set of new requirements for payday lenders: registration of check cashers, a bond, the verification that customer has only 1 outstanding loan at any given time; it also requires an extended payment plan to be offered to borrowers who can’t repay in time.
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (expected in November 2020).
- 2017 – SB 286 was introduced: “A customer has the right to rescind a deferred deposit by returning the principal amount used to fund the deferred deposit.” The new law would also allow to convert a payday loan into an installment loan. And it would also put a 36% APR on a deferred deposit loans. It failed as many before it.
(As of April 2019)