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The Department of Banking treats payday lenders as unlicensed small loan lenders, and loans above 12% under $15,000 are void and unenforceable unless the lender is licensed — in which case the ceiling is 36%.
Connecticut Department of Banking
The Department states it directly: loans of up to $15,000 charging above 12% per annum are void and unenforceable under Connecticut banking law, unless made by a bank, credit union or licensed Small Loan Company. And a licensed Small Loan Company may charge no more than 36% APR.Connecticut · RegulatorConnecticut Dept. of Banking — Connecticut Banking Law considers such loans void and unenforceable unless made by certain exempt persons; Small Loan licensees can charge up to 36% annual percentage rate
The Department goes further and says plainly that it considers payday loan companies to be unlicensed small loan lenders. The product has no lawful form here.
Conn. Gen. Stat. §§ 36a-555 to 36a-573 — Small Loan Lending and Related Activities Act
Senate Bill 1033, effective 1 October 2023, rewrote the Small Loan Act. The changes that matter to a borrower:
APR is now calculated under the Military Lending Act, not the Truth in Lending Act — an all-in figure. The finance charge definition was widened to capture essentially everything: any amount agreed by a borrower in furtherance of obtaining credit, and any fee charged or paid in connection with the loan, voluntary or otherwise.
The scope widened too. The small loan limit rose from $15,000 to $50,000; loans between $5,000 and $50,000 are capped at 25%; and the definition now covers income sharing agreements, refund anticipation loans, pension advances and advances against future pay or salary. The Department has since extended it to earned wage access products.
A true-lender test was codified — a predominant economic interest standard aimed at bank-partnership arrangements.Connecticut · RegulatorConnecticut Dept. of Banking industry guidance on Public Act 23-126 — true lender regulation seeks to prevent non-banks from avoiding APR restrictions through partnerships with banks
You can revoke authorisation and instruct your bank to stop the payment, whatever your agreement says.
What Regulation E says about automatic payments →
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A payday loan is a consumer debt. If it goes unpaid, two Connecticut rules decide what a lender can do next: how long it has to sue you, and how much of your pay a court can order taken.
Being sued over an old payday loan? A collector can still file, but the time limit is a defence you can raise — and you cannot be jailed for the debt. What can and cannot happen if you don’t pay →