Payday lending is legal in Montana (however, restrictions apply).
Montana has a limit on payday loans offered in the state: $50-$300. The minimum loan term is 14 days; the maximum loan term is 31 days. The APR is capped at 36%, lenders cannot set higher rates for their loans. Rollovers are not allowed. Criminal actions against borrowers are prohibited.
From 1999 to 2010 Montana was a place to be a payday lender. The industry flourished and interest rates reached 400%. However, the situation changed with the passing of HB 118. As of today, payday lenders can legally operate in the state provided that they comply with the 36% APR cap (all lenders, online ones as well). In the result, according to the 2016 report in the Journal of Economics and Business, there were no licensed lenders in Montana and only 57 were revealed altogether, judging by the data about payday lenders based on NAICS codes.
Montana Payday Lending Statutes
Payday lending in Montana is regulated by Mont. Code Ann. 31-1-701.
All lenders willing to give loans to Montana residents (including online ones) must have a license to operate in the state.
All restrictions imposed on the lenders by the state are meant to protect the residents from the trouble with indecent lenders.
Loan Amount in Montana
- The maximum amount of payday loan allowed in Montana is $300.
- The minimum
Rates, fees and other charges in Montana
- “(2) A licensee may not charge a fee for making or carrying each deferred deposit loan authorized by this part that exceeds 36% per annum, exclusive of the insufficient funds fees authorized in subsections (3) and (4).” (Mont. Code Ann. 31-1-722)
- A $100 loan given for a fortnight will be charged with only $1.39.
- “(5) (a) The loan agreement must contain a provision that the consumer may rescind the transaction if, by 5 p.m. of the licensee’s first business day following the day that the loan was executed, the consumer provides the licensee with cash or certified funds equaling 100% of the amount loaned to the consumer.” (Mont. Code Ann. 31-1-715)
Maximum term for a payday in Montana
- According to the Montana legislation, payday loans in the state are allowed for a period of 14 to 31 days.
- No rollovers are allowed; nor are any renewals, or refinance, or extensions.
- It is also illegal for a lender to make a borrower get a new loan in order to repay the previous one. Moreover, no interest can be charged for this.
- In terms of collection, payday lenders in Montana are allowed to charge one insufficient funds fee in the amount not exceeding $30 and also some reasonable attorney fee.
- Any criminal actions are prohibited as in the state of Montana. Payday loan debts and non-repayments are considered civil offense and are not in any case fraught with imprisonment. If a borrower is unable to repay, they should inform a lender in a written form about the matter in advance. Borrowers should not get scared of the threats about criminal prosecutions and the like; what is more, as a rule, lenders are unwilling to deal with anything involving legislation and courts. Therefore, one thing is required from a borrower – to be legally literate and be aware of the state laws.
More information about payday loans in Montana can be found on the official website of the Division of Banking and Financial Institutions.
The History of Payday Loans in Montana
- 1999 – Montana legalized payday lending. For more than a decade, payday lenders flourished in the state and offered loans at exorbitant rates.
- 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 Montana is now allowed to offer loans to the military in excess of 36% APR.
- 2010 – Finally, after all these years of triple-digit APR, the State Legislature passed HB 118. The new law reinstated usury laws in the state and effectively capped interest rates at 36%. The situation forced many lenders to go online; however, those also were requested to comply with the state laws.
- 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).
- Present days – Payday loans are officially legal in Montana, however, since 2010 the number of lenders has dropped to a minimum.
(As of May 2019)