California regulates payday lending under the California Deferred Deposit Transaction Law (CDDTL), Financial Code §§ 23000–23106. The law sets strict limits on loan amounts, fees, and lender conduct — and gives borrowers specific enforceable rights. This article covers what the law requires, what it prohibits, and what happens when lenders violate it. It applies specifically to deferred deposit transactions made by DFPI-licensed lenders. If your loan came from a tribal lender, an unlicensed online lender, or is structured as an installment loan above $300, different rules apply.
Scope: What Type of Loan Does This Article Cover?
This article applies to deferred deposit transactions made by lenders licensed under the CDDTL, Financial Code §§ 23000–23106. Verify your lender’s license at dfpi.ca.gov before assuming these rules apply to your situation.
If your loan is any of the following, different rules govern it:
- An installment loan above $300 — California Financing Law, Financial Code § 22000 et seq.
- A tribal loan — lenders claiming sovereign immunity are not subject to DFPI licensing or California fee caps
- An earned wage access product — regulated separately, not a payday loan under California law
- A loan from an unlicensed online lender — may be void and unenforceable, but asserting that defense requires action on your part
The Regulator: DFPI
The California Department of Financial Protection and Innovation (DFPI) licenses, examines, and enforces compliance for all payday lenders operating in California under the CDDTL. Every payday lender — storefront or online — must hold a valid DFPI license. The DFPI can issue citations, impose fines, suspend licenses, and revoke licenses for violations.
You can verify any lender’s license and check for disciplinary actions at dfpi.ca.gov. If a lender is not in the DFPI database as a deferred deposit originator, they are operating illegally in California.
What the Law Requires of Lenders
Under the CDDTL, every licensed payday lender must:
- Provide a written loan agreement before the transaction is completed
- Disclose the total fee in dollars, the APR, the total repayment amount, and the repayment date — in writing, before you sign
- Provide the loan agreement in the language primarily used during your negotiations
- Display their DFPI license visibly at the place of business
- Verify that no other payday loan from the same lender is currently outstanding before issuing a new one
- File annual reports with the DFPI disclosing lending activity
What the Law Caps
The CDDTL imposes hard caps on every transaction:
- Maximum check face value: $300 — meaning the maximum cash you receive is $255
- Maximum fee: 15% of the check face amount — $45 on a $300 check
- Maximum term: 31 days
- NSF fee: $15, one time only, on a returned check or failed ACH debit — Financial Code § 23035
- Extended payment plan fee: $0 — the lender cannot charge you for a payment plan — Financial Code § 23036.5
What the Law Prohibits
Licensed payday lenders are prohibited from:
- Charging more than $45 on a $300 transaction
- Issuing a loan with a face value above $300
- Rolling over a loan by issuing a new loan to pay off the old one — Financial Code § 23037
- Issuing a new loan while a prior loan from the same lender is outstanding
- Charging more than one $15 NSF fee on a returned item
- Charging any fee for an extended payment plan
- Threatening criminal prosecution for nonpayment
- Taking criminal action against a borrower whose check is returned unpaid
The Extended Payment Plan Right
If you cannot repay your payday loan on time, you have the right under Financial Code § 23036.5 to request an extended payment plan at no additional charge — at least once every 12 months. The lender must honor it. You must request it before the due date. The lender is not required to offer it proactively.
DFPI Enforcement
The DFPI enforces the CDDTL through examinations, citations, and license actions. Citations can reach $2,500 per violation. Repeat or egregious violations can result in license suspension or revocation. The DFPI also processes consumer complaints and can require lenders to make restitution.
If a licensed lender violates the CDDTL, file a complaint with the DFPI at dfpi.ca.gov/file-a-complaint. The DFPI will forward the complaint to the lender, investigate violations, and take action where warranted.
Federal Law on Top of State Law
California’s CDDTL sets the floor for licensed lenders. Federal law adds additional protections:
- CFPB Payday Loan Payments Rule, effective March 30, 2025 — after two consecutive failed withdrawal attempts, the lender cannot try again without new written authorization
- FDCPA, 15 U.S.C. § 1692 et seq. — applies once a third-party collector takes over the account
- Rosenthal Act, Civil Code § 1788 et seq. — applies to original creditors and third-party collectors both
- Electronic Funds Transfer Act, 15 U.S.C. § 1693 — protects against unauthorized electronic withdrawals
Unlicensed Lenders
A lender operating without a DFPI license is violating California law. Loans made by unlicensed lenders may be void and unenforceable — meaning the lender has no legal right to collect. However, asserting unenforceability is a defense you must raise. If an unlicensed lender is attempting to collect, verify license status at dfpi.ca.gov and file a complaint with the DFPI. The DFPI actively pursues unlicensed lenders and posts enforcement actions on its website.
If You Are Sued
If a payday lender or collector sues you, you have 30 days to respond in limited civil court or must appear on the hearing date in small claims. Do not ignore it.
Learn how to respond to a debt collection lawsuit in California →
If you are weighing whether bankruptcy might be the right move, speaking with an attorney is the right first step.
Frequently Asked Questions
Who regulates payday lenders in California?
The California Department of Financial Protection and Innovation (DFPI) licenses and regulates all payday lenders operating in California under the CDDTL. You can verify any lender’s license and check for disciplinary actions at dfpi.ca.gov.
What is the maximum a payday lender can charge in California?
Under the CDDTL, the maximum fee is 15% of the check face amount — $45 on the maximum $300 transaction. The lender keeps $45 and you receive $255. No additional interest or fees are permitted under the CDDTL.
Are rollovers legal in California?
No. Financial Code § 23037 prohibits lenders from rolling over a payday loan by issuing a new loan to pay off the old one. Each transaction must be a separate loan with a new application.
Can a payday lender threaten to have me arrested for not paying?
No. California law expressly prohibits criminal action against a borrower whose payday loan check is returned unpaid. Any threat of arrest or criminal prosecution for nonpayment is illegal under both the CDDTL and the FDCPA.
What can I do if a payday lender violates the law?
File a complaint with the DFPI at dfpi.ca.gov/file-a-complaint and with the CFPB at consumerfinance.gov/complaint. If a third-party collector is involved, violations of the FDCPA and Rosenthal Act may give you grounds for a private lawsuit.
Is an online payday lender subject to California law?
Yes — if it holds a valid DFPI license as a deferred deposit originator. Unlicensed online lenders, including many tribal lenders, are not bound by the CDDTL’s fee caps and borrower protections.
Sources
- California Deferred Deposit Transaction Law, Financial Code §§ 23000–23106
- California Financing Law, Financial Code § 22000 et seq.
- Financial Code § 23035 (NSF fee limit)
- Financial Code § 23036.5 (extended payment plan)
- Financial Code § 23037 (rollover prohibition)
- CFPB Payday Loan Payments Rule, effective March 30, 2025 — CFPB
- Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
- Rosenthal Fair Debt Collection Practices Act, Civil Code § 1788 et seq.
- Electronic Funds Transfer Act, 15 U.S.C. § 1693 et seq.
- DFPI Payday Lenders Page — dfpi.ca.gov
- DFPI License Lookup — dfpi.ca.gov
- DFPI Complaint Portal — dfpi.ca.gov/file-a-complaint
- CFPB Complaint Portal — consumerfinance.gov/complaint
- Lawyers for the Little Guys — lawyersforthelittleguys.com/request-a-consult