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New WA Payday Loan Limits Take Effect Jan. 1

December 30, 2009

SEATTLE - Washington's new state laws to curb payday loan abuse are equally tough on both short-term borrowers and their high-interest lenders. Starting January 1, no one can take out a payday loan that totals more than $700 - or one-third of their gross monthly income - and lenders can check the borrower's loan history on a statewide database. The maximum number of payday loans that legally can be issued per person in a 12-month period is eight.

Deb Bortner is director of consumer services for the Washington State Department of Financial Institutions (DFI), the agency that licenses payday lenders. She says the goal is to keep people from getting stuck in an expensive cycle of debt.

"What we've seen is there are people - a very small number of people - who actually take out one a week. The law says you're not supposed to be able to take out one loan to pay off the last loan."

Other states have passed caps on payday loan interest rates, but Bortner says Washington lawmakers took a different approach, limiting the amounts people can borrow and making lenders work with those who cannot keep up with payments.

"When people do get in trouble and they can't pay back a loan, they can tell their lender, on or before it's due, 'I can't pay it back on time.' Then they're eligible to get a free installment plan."

She says the installment plan gives the borrower 90 days to pay back a loan of $400 or less and 180 days for larger amounts. The new law also sets out specific rules for when and how often a lender can contact a borrower who is behind on payments.

According to Bortner, payday lenders do not like the new law because they make more money by rolling over one loan into another. However, with more than $1 billion in short-term loans made per year across the state, she says lawmakers decided both lenders and borrowers needed some limits.

The DFI web site contains an explanation of the new laws and offers the ability to verify whether a lender is licensed, at

Chris Thomas, Public News Service - WA