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They are illegal here — under both civil and criminal law. And that matters far more than it sounds, because of what New York law does to an illegal loan.
The part most borrowers are never told
Under General Obligations Law § 5-511, a usurious loan made by a non-bank lender is void and unenforceable. Not merely overpriced — legally unenforceable.
Which means that attempting to collect it breaks further laws. The state has said so directly: collecting on these debts violates New York General Business Law § 601(8) and the federal Fair Debt Collection Practices Act at 15 U.S.C. §§ 1692e(2) and 1692f(1).
The Department of Financial Services has written to every debt collector in New York to say exactly this — that it is illegal to try to collect on a payday loan, because such loans are illegal in the state.
General Obligations Law § 5-501 · Banking Law § 14-a · Penal Law §§ 190.40–190.42 · General Obligations Law § 5-511 · Banking Law § 340
Read the DFS notice to debt collectors →
This is general information, not legal advice, and your circumstances matter. But these are the steps that follow from what the state itself has published.
Whatever the legal position on the debt, you can revoke authorisation and instruct your bank to stop the payments. Do that before anything else — it does not require agreeing or disagreeing about what you owe. What the regulation says →
Take the total of every fee and charge, annualise it over the loan term, and compare against 16% and 25%. A $50 fee on a $300 loan for 14 days is roughly 435% a year. Nearly every payday loan sits far above the criminal threshold.
The rules differ for a licensed bank. Search the lender at dfs.ny.gov. If they hold no New York licence and lent you under $25,000 above 16%, Banking Law § 340 is engaged as well.
DFS has issued cease-and-desist demands to online payday operators reaching New Yorkers, and has taken action against debt buyers who bought and collected these loans. The Attorney General’s Consumer Frauds Bureau also accepts complaints.
“Void and unenforceable” is the statutory language, but how it applies to your loan depends on where it was made, who made it and what you have already paid. New York legal aid offices handle exactly this and are normally free. Do not simply stop paying on the strength of a web page — including this one.
DFS has demanded that dozens of online lenders cease offering payday loans to New Yorkers, having found rates in excess of 400, 600, 700 and in some cases 1,000 percent.New York · EnforcementGovernor’s office — DFS demanded 35 companies cease and desist; investigation found rates in excess of 400, 600, 700 or even 1,000 percent
It has also reached settlements with debt-buying companies that purchased illegal payday debts and pursued New Yorkers for the full face value. In one case a buyer had attempted to collect on 7,325 payday loan debts from New York consumers.
If a collector is chasing you for a payday loan in New York, they may be the ones breaking the law.
“We’re a tribal lender, state law doesn’t apply.” Several online lenders affiliated with federally recognised tribes assert sovereign immunity from state caps. Whether that holds has been litigated repeatedly with mixed outcomes. Nine such lenders appear in our directory.
“Your agreement says another state’s law applies.” Choice-of-law clauses in consumer loan agreements are frequently contested, and New York courts have addressed them. This is precisely the sort of question to put to a lawyer rather than accept from the lender.
Every figure carries the jurisdiction and the exact provision it came from. Click to open the source.
A payday loan is a consumer debt. If it goes unpaid, two New York 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 →