Online Payday Lenders Look To Skirt New York Restrictions

March 31, 2026- Assemblymember Steven Raga, a Queens Democrat, and Katy Lasell, of the New Economy Project, make the case for rewriting New York’s consumer protection laws to regulate the latest evolution of payday lenders that are skirting existing restrictions on loans.

This is the title of a new Capitol Pressroom segment about how online payday lenders are using new structures and tech to evade New York’s longstanding payday lending ban, and why advocates are pushing to update state law in response.

• New York effectively bans traditional payday loans by capping interest at 16% (criminal usury at 25%) and requiring state licensing, which most payday lenders cannot meet.

• Despite this, a “latest evolution” of online payday lenders is reaching New Yorkers using workarounds such as bank partnerships, out‑of‑state or tribal charters, and novel product labels (e.g., “earned wage access,” “installment advances”).

• Assemblymember Steven Raga and Katy Lasell of New Economy Project argue that current statutes and enforcement tools, designed around older models of payday lending, do not squarely capture some of these newer online products and intermediaries.

Policy and enforcement context

• New York regulators have previously used cease‑and‑desist orders, ACH‑access cutoffs, and litigation to stop illegal online payday loans, including demands that 35 online lenders halt loans with APRs up to 1,095% and that banks and NACHA cut off payment channels.

• The Attorney General has also sued internet lenders like Western Sky and CashCall for usurious internet loans to New Yorkers, alleging rates from 89% to over 355% and asserting state usury and licensed‑lender laws apply despite tribal or out‑of‑state affiliations.

• Advocates now want statutory updates that would more clearly cover new online models and close gaps that allow high‑cost credit to be marketed into New York while nominally structured to avoid existing caps.

Likely reforms being discussed

• Clarifying that any high‑cost loan to a New York resident is subject to New York’s usury and licensing rules, regardless of where the lender is based or how the product is branded.

• Tightening rules around third‑party lead generators and payment processors that funnel New Yorkers into illegal or quasi‑legal payday‑style products.

• Explicitly regulating newer products (e.g., wage‑advance apps) as credit when they function like loans, to prevent them from operating as de facto payday loans outside the rate cap.