Avoid payday loans if you can. Payday loans can turn a short-term need for emergency cash into a long-term, unaffordable cycle of high-interest loans that you cannot repay. It is hard to both repay a payday loan and keep up with normal living expenses, so payday loans often force borrowers to take out another high-interest loan, over and over again.
Thus, payday loans often lead to repeat loans—at very high interest rates.
If you need to take out a payday loan, do so only for emergency expenses and make sure you are able to pay it back without taking out another loan. Otherwise, you can get stuck in a debt trap.
In California, payday lenders can loan up to $300 and charge a maximum of $45 in fees. Although this fee may not seem too high, the average annual percentage rate for payday loans is 372%. This is a much higher rate than most other loans or credit cards. Payday lenders often don’t consider whether you can repay the loan—because they are able to just cash your check or access your checking account. This means you may not have enough money left to pay for other expenses, forcing you to take out another loan.
Payday lenders are regulated by the Department of Financial Protection and Innovation (DFPI). The DFPI has an online brochure about payday lending:
You can contact the DFPI to check the license of a payday lender, history of disciplinary actions against a payday lender, or to file a complaint. You can submit a complaint to the DFPI online or, to submit a complaint by mail, download the Complaint Form (in Spanish: Formulario de Quejas de el Consumidor) and mail to:
Department of Financial Protection and Innovation
Attn: Consumer Services
1515 K Street, Suit 200
Sacramento, CA 95814
If you need assistance with the form, call 1-866-275-2677.
You may also file a complaint with our office using our online complaint form.