California Payday Loan Laws, Explained

Last updated: July 20, 2026

By the US Lending Editorial Team · Reviewed for factual accuracy against the federal and state sources cited on this page.

Key takeaway

Key takeaway: California runs two separate rate structures depending on loan size — a tight cap on small payday loans and a newer, more moderate cap on larger installment products. Which one applies to you depends entirely on how much you're borrowing.

Who this is forThis guide is for California residents comparing a payday, cash-advance, or short-term loan, and anyone checking what is legally allowed before they borrow.

When to use itUse it before you accept any offer, so you can compare the total cost across more than one lender.

What this page covers

Small Payday Loans: The $300 / 15% Rule
Larger Loans: AB 539's 36% + Fed Funds Rate Cap
Which Category Will You Fall Into?

Small Payday Loans: The $300 / 15% Rule

Under the California Deferred Deposit Transaction Law, a single-payment payday loan is capped at $300, with the lender allowed to charge a maximum finance fee of 15% of the check's face value. On a typical two-week loan, that works out to an effective APR in the triple digits — the dollar cap keeps total cost limited, but the annualized rate is still high because the loan term is so short.

Larger Loans: AB 539's 36% + Fed Funds Rate Cap

Assembly Bill 539, effective since 2020, closed a gap that let some lenders avoid rate limits entirely by issuing loans just above the old $2,500 threshold. Now, any loan of $2,500 up to $10,000 made under the California Financing Law is capped at 36% APR plus the federal funds rate, must run longer than 12 months, and cannot carry a prepayment penalty. This effectively pushed lenders who want to offer bigger loans into fairer, longer-term structures.

Which Category Will You Fall Into?

Short answer — If you need a small amount to bridge a short gap — under $300 — you're looking at the traditional payday structure with its higher effective rate. If your need is larger, from $2,500 to $10,000, lenders offering that size loan in California must structure it as a longer-term installment product under the AB 539 rate cap. There's a gap between $300 and $2,500 where the CDDTL doesn't apply and AB 539 doesn't apply either — loans in that range fall under other CFL provisions with their own rules.

Loan Size	Governing Law	Cap
Up to $300	Deferred Deposit Transaction Law	15% max finance charge
$2,500 – $10,000	AB 539 / California Financing Law	36% + federal funds rate, 12+ month term

Rate structures and thresholds can shift with new legislation — verify current terms with the California Department of Financial Protection and Innovation before assuming any figure above still applies.

Because California's rules split sharply by loan size, comparing offers across lenders — and across loan amounts — matters more here than in states with one flat rate.

Sources: NCSL — Payday Lending State Statutes · CFPB — Payday Loans

California Payday Loan FAQ

Are payday loans legal in California?

Yes. California caps small payday loans of up to $300 at a 15% maximum finance charge under the Deferred Deposit Transaction Law.

How much can you borrow with a payday loan in California?

Small payday loans are capped at $300. Larger installment loans of $2,500 to $10,000 fall under a separate 36%-plus cap (AB 539) with terms of 12 months or more.

What is the fee on a California payday loan?

For loans up to $300, the maximum finance charge is 15% of the loan amount.

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