Washington Payday Loan Law and Legislation

Washington Payday Loan Regulations
Legal Status
Legal
Interest Rate (APR)
391%* APR
Minimum Loan Amount
Not Specified
Maximum Loan Amount
$700 (*or 30% of gross monthly income)
Minimum Loan Term
Not Specified
Maximum Loan Term
45 days
Finance Charges
<$500 = 15%;
>$500 = 10%

Payday lending is legal in Washington.

In the state of Washington, the maximum payday loan amount should not exceed $700 or 30% of the gross monthly income. The maximum loan term is 45 days. Average APR for a $300 payday loan is 391%*. Finance charges for loans smaller than $500 should not exceed %15, for loans larger than $500 – 10%. Criminal actions are prohibited. Roll-overs and extensions are not allowed.

Washington has so far been good in taking measures against high-cost lending practices. Thanks to the existing regulations, the number of payday lending locations reduced considerably: 23.9% from 2016 to 2017. And since 2006, the decrease has been even more prominent – 88.4% (According to DFI 2017 Payday Lending Report). So has the annual dollar volume of payday loans in Washington (82% decrease since 2006).

Washington Payday Lending Statutes

It is allowed for payday lending companies to function in Washington provided that they comply with the state laws. The regulating law is Wash. Rev. Code Ann. 31.45.010 et seq. Payday lenders come here in the “Chapter 31.45 RCW – Check Cashers and Sellers”.

Payday lenders wishing to operate in the state are obliged to have a license. The Washington State Department of Financial Institutions (DFI) is responsible for giving licenses and it also regulates payday loan industry in the state. You can verify a license of a payday lender online.

ALL lenders in the state must have a license from the DFI and adhere to Washington’s loan limits and terms. Internet payday lenders that do business in Washington have to comply with this requirement as well as in-store lenders.

The license should be visible to all the customers. Additionally, the company ought to display a copy of the fee charts. Before opening such business, the person is to post a bond and pay the fee. After receiving the approval, from the Department of Financial Institutions, it is necessary to pay the annual charges. It also required that every lender must have a small loan endorsement to their check casher license in order to make payday loans.

Loan Amount in Washington

  • The maximum amount of all outstanding payday loans is $700. Besides, there is a limitation that a loan should not exceed 30% of a person’s gross monthly income, whichever is less.
  • Only 8 payday loans per 12-month period are allowed.

Rates, fees and other charges in Washington

  • Finance charge on a $100 loan given for a period of two weeks cannot exceed $15.
  • A cash advance of $500 and less comes with the percentage rate of 15%, loans from $500 to $700 will have a 10% rate.  

“The payday lender is permitted to charge you a fee of $15 per hundred dollars loaned for loans up to and including $500 and $10 per hundred dollars loaned for loan amounts over $500 and up to and including $700.”(Payday Loan Brochure DFI)

Real APR for payday loans in Washington can reach 391% (*According to the Center for Responsible Lending 2019: “Typical APR based on average rate for a $300 loan advertised by largest payday chains or as determined by state regulator, where applicable.”).

Maximum term for a payday in Washington

  • The maximum loan term is 45 days.

“Under Washington law, your loan term must be your next pay date or the pay date after that if your first pay date is within 7 days of the date the loan is made. The loan term cannot be longer than forty-five days, unless you enter into an installment plan or otherwise agree to an longer loan term.” (Payday Loan Brochure DFI)

  • Rollovers, renewals, extensions and the like are not allowed in the state.
  • There is a requirement for a repayment plan for borrowers. It goes without any extra cost if they notify lender on or before the loan is due. A 90-day plan is offered for a debt of $400 or less and at least 180 days for debts that exceed this amount.

Consumer Information

  • NSF should not exceed $25 and collection costs are also allowed.
  • Any criminal actions against borrowers are considered illegal in the state.

More information about payday loans in Washington can be found on the website of the Washington State Department of Financial Institutions (DFI).

You can file a complaint with the DFI if you have a problem with a payday lender operating in Washington.

The History of Payday Loans in Washington

  • 1995 – The first payday lending laws were passed by the Legislature in Washington under the Check Cashers & Sellers Act (RCW 31.45).
  • 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 Washington is now allowed to offer loans to the military in excess of 36% APR.
  • January 1, 2010 – The new payday loan regulation took effect (Rev. Code Ann. 31.45.010 et seq.). It limited the number of payday loans that consumers can take out a year to 8.
  • Also, according to it, prior to issuing any loans, all lenders have to access a special database and check the eligibility of each customer. The database contains detailed information about payday loans and their borrowers (social security number, or equivalent ID number, and their gross monthly income information), each transaction of the sort made to Washington residents by licensed lenders should be present in the database. Based on this data a lender should either issue or refuse a perspective customer.
  • 2010-2015 – Washington saw a considerable reduction in the number of payday lenders operating in the state.
  • 2015 – There was an attempt to loosen payday loan regulations in the state, however, the attempt was unsuccessful.
  • June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (the federal rule is expected in November 2020).
  • 2019 – Currently, the legislation with regard to payday loans in the state of Washington stays the same.

(As of April 2019)

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