Be careful and do your homework before taking out a payday loan. Although advertised as a quick, short-term fix to help you in hard times, many payday-loan borrowers end up needing to take out multiple loans and falling into long-term debt at very high interest rates. Payday loans can turn a short-term need for emergency access to cash into a destructive and unaffordable cycle of repeat high-interest loans that you cannot afford to repay. Avoid payday loans if you can. 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.
Payday loans (called deferred deposit transactions under California law) typically charge very high interest rates. In California, payday lenders can loan up to $300 and charge a maximum of $45 in fees. Although these fees may not seem too high, when you factor in the small amount of the loan and the short loan period, payday loans charge an average of 372% APR (annual percentage rate). This is a much higher rate than most other loans or credit cards. Payday loans often are made without regard to your ability to repay the loan—because the lenders are able to just cash your check or access your checking account. Because borrowers may lack the ability to both repay the loan and keep up with their normal living expenses, payday loans often force borrowers to take out more high-interest loans, over and over again.
Payday lenders are regulated by the California Department of Business Oversight (DBO). The DBO has an online brochure about payday lending:
- What You Need to Know About Payday Loans
- In Spanish: Lo que usted necesita saber sobre los préstamos de día de pago
You can contact the DBO to check the licensing status of a payday lender, history of disciplinary actions against a payday lender, or to file a complaint. You can submit a complaint to the DBO 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 Business Oversight
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.