The Small Loan Act's 23% Cap
Massachusetts General Laws Chapter 140, Sections 96 through 113 — the Small Loan Act — caps the finance charge on small loans under $6,000 at 23% APR, plus a maximum $20 administrative fee. That's a fraction of the 300%+ APR a typical payday loan carries elsewhere, which makes the traditional payday model financially unworkable for any lender trying to operate legally in the state.
Licensing Requirement
Any lender offering small-dollar loans in Massachusetts has to be licensed through the Office of Consumer Affairs and Business Regulation (OCABR) and stay within the Small Loan Act's terms. This isn't a rate cap that exists on paper only — licensing enforcement is what keeps the 23% ceiling meaningful.
What's Actually Available
Because the payday product doesn't fit within the 23% cap, Massachusetts borrowers looking for short-term credit are generally looking at licensed small consumer loans priced at or under that rate, credit union alternatives, or personal installment loans — not single-payment payday products.
| Factor | Massachusetts Rule |
|---|---|
| Small loan APR cap | 23%, plus max $20 admin fee |
| Governing law | Small Loan Act, M.G.L. c. 140 §§ 96–113 |
| Licensing authority | Office of Consumer Affairs and Business Regulation |
| Cap in effect since | 1980 |
Since traditional payday loans don't have a legal path in Massachusetts, the more useful comparison is between licensed small-loan and installment products priced under the 23% cap.
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