Payday Loans & Cash Advances – What Consumers Need to Know

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Payday loans:

Easy to get. Harder to pay off.

A cell phone logoPayday loans are small loans based on very short terms. They’re for $300 or less, and typically have to be repaid within two to four weeks. Also called cash advance loans, they are legal in many states, including California.

If you’re pressed for some quick cash, a payday loan or cash advance may tempt you with the promise of easy relief. But these are financial products that ca n pull you into a cycle of debt, and often bring more pain than they’re worth.

Payday loans are legal (within limits!) in the Golden State

Payday loans and cash advances are legal in California, and are regulated by the DFPI. It’s always a good idea to research who you’re borrowing from: You can check to make sure a payday lender is licensed, and to see any history of disciplinary actions, using DFPI’s financial services search tool.

California law protects borrowers by establishing certain limits:

  • Payday lenders can loan a maximum of $300, while fees are limited to $45.
  • A payday lender cannot make a new loan to pay off an existing loan.
  • Additional fees cannot be charged if you request an extension or payment plan.

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Find out if a payday lender is licensed to do business in California.
Search here.

Hard facts paint a grim story

According to a large-scale study by the Pew Charitable Trust, payday loans are taking a toll on American families and their finances:

  • Twelve million Americans take out payday loans each year.
  • Annual spending on fees exceeds $9 billion.
  • Most borrowers pay more in fees than they originally received in credit: The average payday loan borrower is in debt for five months of the year, spending an average of $520 in fees to repeatedly borrow $375.
  • With direct access to a borrower’s checking account, payday lenders can collect from the borrower’s income before other lenders or bills are paid.
  • The CFPB found that 80 percent of payday loans are taken out within two weeks of repayment of a previous payday loan.

What You Can Do

You have options

If you’re in the market for a short-term loan, you’re probably facing urgent needs and great anxiety. But before resorting to a payday loan or cash advance, consider these options:

  • Negotiate with your creditor to obtain more time to pay your bill, or to establish a payment plan.
  • Borrow from family or friends.
  • Apply for a “bad credit” personal loan.
  • Shop for a credit card that offers lower interest than the high rates represented by payday loan fees.
  • Obtain an advance from your employer.
  • Seek help from nonprofits and charities.

File a Report Online

If you have issues with your servicer or think that your rights have been violated, submit a complaint online, call us at (866) 275-2677 or send an email to

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Last updated: May 1, 2024 @ 8:59 am