Payday lending is legal in Washington, but the state caps it so tightly that the industry is a fraction of what it once was. Under Washington's Check Cashers and Sellers Act (RCW 31.45), a licensed payday lender may advance no more than $700 or 30% of your gross monthly income, whichever is less, for a term of up to 45 days. Fees are capped at 15% on the first $500 borrowed and 10% on any amount above $500, so the most you can ever be charged on a maximum $700 loan is $95. Critically, Washington prohibits rollovers entirely and limits each borrower to eight payday loans in any rolling 12-month period, enforced through a statewide database. These rules differ sharply from neighboring and many other states, which is why the exact figures matter.
Is Payday Lending Legal in Washington?
Yes. Unlike states that ban small-dollar payday loans outright or impose a 36% APR cap that makes them unprofitable, Washington allows licensed payday ("small loan") lenders to operate. However, it regulates them heavily through the Department of Financial Institutions (DFI), which licenses every storefront and online lender doing business with Washington residents. An unlicensed lender cannot legally collect on a payday loan made to a Washington consumer, and any loan made in violation of the cap structure is uncollectible.
Because the state controls fees and the number of loans rather than setting a flat low APR, payday lending survives in Washington but at a much smaller scale than before the 2009 reforms that added the loan limit and database.
How Much Can You Borrow and for How Long?
The statutory ceiling is $700. If 30% of your gross monthly income is less than $700, that smaller figure becomes your personal limit. The combined principal of all your outstanding payday loans cannot exceed that cap at one time, so you cannot stack multiple loans to get around the $700 ceiling.
The maximum term is 45 days. A lender cannot write a loan due in, say, two weeks and then quietly extend it for more fees. When the loan comes due, it must be paid; it cannot be "renewed" or "rolled over" into a new loan, which is the trap that drives the debt cycle in less-regulated states.
What Do the Fees Actually Cost in APR Terms?
Washington's caps are stated as flat fees, not an annual percentage rate, but the APR can still be very high. A $100 loan with the maximum 15% fee, repaid in roughly two weeks, works out to an APR near 390%. On a full 45-day term the effective annual rate is lower, but payday credit in Washington remains an expensive product. The state's protection comes less from a low rate and more from the hard loan-count limit, the rollover ban, and the no-cost installment option described below.
Rollover Ban and the Free Installment Plan
Washington flatly prohibits rollovers and refinancing of one payday loan with another. Instead, if you cannot repay on the due date, the law gives you a right that many states do not: you can convert the loan into an interest-free installment plan at no extra charge. You must request it, generally before the loan is in default, and the lender cannot charge additional fees for it.
- For an original loan of $400 or less, the installment plan must run at least 90 days.
- For an original loan of more than $400, the plan must run at least 180 days.
While you are on an installment plan, the lender cannot make you a new payday loan. This is one of the strongest consumer features in Washington's law, and many borrowers do not know it exists.
The Eight-Loan Limit and Statewide Database
No Washington consumer may take out more than eight payday loans from all lenders combined in any 12-month period. Before issuing a loan, the lender must check a real-time statewide database to confirm you are under the limit and do not have an open loan that would push you over the $700 principal cap. This database is the backbone of enforcement: it stops the practice, common elsewhere, of borrowing from multiple storefronts at once.