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?
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 |
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.
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