Payday loans are legal but tightly capped in Minnesota. The state does not ban them outright, but it does not let lenders charge whatever they want either. Under Minnesota's consumer small loan law (Minn. Stat. § 47.60), a payday-style small loan cannot exceed $350, and the fees a lender may charge are limited by a tiered schedule that rises with the loan size rather than by a single flat percentage. A separate statute, the consumer short-term loan law (Minn. Stat. § 47.601), governs slightly larger short-term loans and adds further borrower protections. On top of that, Minnesota lawmakers enacted a reform in 2023 that layered an overall annual-percentage-rate (APR) ceiling onto these loans, phased in beginning in 2024. The bottom line: small-dollar lending exists in Minnesota, but the price and structure are controlled by statute.
Is payday lending legal in Minnesota?
Yes. Minnesota permits licensed lenders to make small-dollar, short-term loans, but only if they are licensed and follow the fee and conduct rules in Chapter 47 of the Minnesota Statutes. A lender that makes these loans without a license, or that charges more than the statute allows, is acting illegally and the loan terms can be challenged.
Two main statutes do the work:
- Minn. Stat. § 47.60 (consumer small loans): covers loans of $350 or less and sets the tiered fee caps described below. This is the classic "payday loan" statute.
- Minn. Stat. § 47.601 (consumer short-term loans): covers short-term loans up to a higher dollar amount and adds rules on repayment ability, rollovers, and the number of loans a borrower can take.
Both are enforced by the Minnesota Department of Commerce, which licenses lenders, and the rules are backstopped by the Minnesota Attorney General's Office, which handles consumer complaints and enforcement.
The interest-rate and fee cap
Minnesota does not express the cap on a consumer small loan as one simple APR. Instead, § 47.60 sets a tiered fee schedule based on how much you borrow. As a general matter, the statute allows a small administrative fee plus a percentage charge that steps down as the loan gets larger, with higher percentage allowances on the smallest loans. Because these fees apply to very short terms, the effective APR can still be high even though the dollar fees look modest.
The exact dollar and percentage figures in the tiered schedule are set by statute and have been adjusted over time, so you should confirm the current numbers directly with the statute or the Department of Commerce before relying on them. What matters for a borrower is the principle: a Minnesota lender cannot charge more than the statutory tier for your loan size, and any charge above that is unlawful.
Minnesota's 2023 legislative session added an additional layer. The Commerce reform enacted that year imposed an overall APR ceiling on consumer small loans and short-term loans, phased in starting in 2024, designed to rein in the highest-cost lending. Because this cap is relatively new and the precise ceiling and effective dates are technical, confirm the current APR limit and how it applies to your loan with the Department of Commerce or the Attorney General's Office rather than assuming an older figure.
For comparison, federal law sets a few important baselines. There is no general federal usury cap on consumer loans, but the federal Military Lending Act caps the "military annual percentage rate" at 36% for active-duty servicemembers and their dependents. Minnesota's state caps apply to everyone in the state; the federal 36% figure is a useful yardstick for how aggressive a state cap is.
Maximum loan amount and term
Under the consumer small loan statute, the maximum amount is $350. The consumer short-term loan statute (§ 47.601) allows larger short-term loans but applies its own protections. Short-term loans are, by definition, due in a short window, often tied to your next payday, and Minnesota law treats loans with very short repayment periods as the category needing the most oversight.
Because Minnesota defines these products by both dollar amount and term, lenders sometimes try to push borrowers into a different loan category to escape the small-loan caps. Minnesota's industrial loan and thrift licensees, for example, have historically structured higher-cost loans under different chapters. If a loan you are offered is much larger than $350 or carries an unusually high rate, ask which statute the lender is licensed under and verify that license with the Department of Commerce.