Financial regulation in the US is composed of many different agencies. The variety of agencies oversee the banking system, financial markets, lenders and companies. Acting independently but attempting to accomplish the same objectives, the agencies operate at both federal and state level. This article looks at the different agencies and lending regulators and gives you an overview of which areas of finance are covered and how they are organized.
- Financial regulatory bodies in the US
- Federal Deposit Insurance Company
- Securities and Exchange Commission
- Payday loans regulators in each state
Financial regulators in the US
The Federal Reserve
The Federal Reserve Board (FRB) is the agency that most people will have heard of. Every time there is a meeting to discuss interest rates or monetary policy the FRB is at the heart of the debate. The FED is in charge of purchasing and selling US Treasury bonds and it is the body which sets the interest rates which influence savings, investments and mortgage rates.
Office of the Comptroller of Currency
The OCC is one of the oldest financial regulators and is there to ensure that the US banking system is sound. The other purpose it fulfills is to supervise the banks so that their operations are efficient. Established in 1863 under the National Currency Act, the OCC oversees many areas of financial services.
Office of Thrift Supervision
Similar is operation to the OCC, the OTS is an organization that is funded by the institutions that it regulates. It covers federal savings and loan associations making sure that competition between the companies is fair and that all the businesses adhere to financial regulations.
Federal Deposit Insurance Company
This is one of the most important regulators and the office makes sure that each bank account holder has their savings covered up to a maximum amount. This is $250,000 for each individual. So, if a bank fails any savings up to this amount are safe. This only applies to banks which have the FDIC insurance and it also only applies to saving deposits.
FDIC does not insure money that has been invested in stocks and bonds, life insurance policies, municipal securities, mutual funds and annuities. The FDIC was formed after the infamous banking runs that occurred in the Great Depression and it ensures that small savers are fully protected.
Financial Industry Regulatory Authority
This regulator oversees the companies that are in the securities business. It is looked on as a self regulatory body and helps to train financial advisors, licensing agencies and is also involved in the arbitration of disputes between customers and financial brokers.
State Bank Regulators
Working in conjunction with the Federal Reserve and the FDIC, state bank regulators supervise banks but at state level. Some of the regulators are tasked with overseeing the payday loans industry and each state has different regulators for short term lending.
Commodity Future Trading Commission
Working mainly within the futures markets, this organization helps to protect the customer from market manipulation like interest rate fixing. It also investigates and prosecutes those who operate frauds or non compliant trading practices.
State Securities Regulators
These state level agencies work in conjunction with SEC and FINRA providing registration for financial investment advisors who are not obliged to register with the SEC. The organization can enforce legal actions against any advisor who does not comply with the laws regarding selling financial products.
State Insurance Regulators
This agency oversees the insurance business and how it is conducted at state level. It protects customers, conducts criminal investigations and enforces actions against financial companies that are operating outside of the lawful state regulations. The SIR also issues licenses and certificates of authority. Businesses based in the state are required to submit full details of their operations.
Securities and Exchange Commission
The SEC was established in 1934 and is one of the most powerful agencies that enforces the federal laws pertaining to the securities industry. Covering the US Stock Exchange, electronic exchanges, options markets and options exchanges, the SEC is also in charge of regulating financial advisors who are not already covered by regulatory bodies at a state level.
Summary of US-wide financial regulators
All of these different agencies overlap at some points and most people will never need to deal directly with financial regulatory bodies. However, it is important to know that how these agencies operate does have a direct effect on many areas of everyday life. The Federal agencies usually override the state agencies when it comes to responsibility. Nevertheless, state agencies are considered to be just as important and have far reaching powers.
Lending financial regulators by state
Each state has a different set of regulators which are responsible for overseeing short term loans (aka payday loans). Listed below you can find which regulatory organization covers the payday lending in each state. The states are listed in alphabetical order and if your own state is not listed, this is because in some states payday loans are illegal.
The Alabama Banking Department
is the regulator for payday loans. In Alabama these kinds of short term loans are also known as deferred presentment transactions. Unlike some other states the regulator in this state is a formal banking organization and not a private body. You can find out all the rules regarding payday loans by looking at the article written specifically for Alabama.
Legalized by the Alaska statutes sec. .50.010, payday loans in the state come under regulations issued by the State of Alaska Department of Commerce
. A separate regulator, the Alaska Division of Banking And Securities provides information and deals with complaints that arise from payday loan customers. The regulator in Alaska has a far more comprehensive list of rules for short term loans and these can be viewed in the article relating to this state.
In the state of California payday loans are also known as deferred deposit transactions and this state has some of the strictest rules. Many state lenders do not offer payday loans due to the restrictive nature of the regulations and California is ahead of the game in cracking down on abusive trading practices.
The California Department of Business Oversight regulates financial transactions. Legislation for store front lenders is written in the California Civil Code 1789.30 and Financial Code 23000. The CDBO give protection to both customers and businesses.
The Attorney General of Colorado
is responsible for the regulation of payday loans in the state. There are many restrictions for short term lending and these are detailed in the Colorado statute number 5-3.1-101 et seq.
Information about the rules for payday loans and how to make a complaint is available from the regulatory organization. For more details about the regulations regarding borrowing limits and fees that can be charged, you can read the article on Colorado.
Payday loans were introduced into the state in 1997 and were legally authorized under Delaware Code Ann. Tit.5 2227 et seq. The regulator for this kind of loan is the Delaware Office Of The State Bank Commissioner
. The state has rules that comprehensively cover short term consumer loans and these rules emphasize that a payday loan is not intended to cover long term financial needs.
Regulations maintain that direct payday lending if not allowed and that stores may only act as brokers between state or national banks and customers. So, in Delaware you are not going to get a direct offer of funds from a lender.
In Florida the regulatory body covering payday loans is the Florida Office of Financial Regulation Division of Consumer Finance
. Set out in statute sec. 560.402et seq, the regulations are very comprehensive and allow customers to verify license holders and to file complaints. Additionally, in Florida, lenders must log all payday loan transactions into a central database.
The organization responsible for regulating payday loans in Hawaii is the Hawaii Department of Commerce and Consumer Affairs
. The restrictions on payday loans in this state mean that you can only use this form of lending as a check cashing transaction. i.e. the borrower must pay back the loan using their paycheck within the allowed time period.
The Idaho Department of Finance
is the regulator using the Idaho Credit Code which covers all kinds of credit agreements including personal loans
, mortgages and payday loans. A separate payday lenders license is required but until 2014 there were no real regulations for this kind of loan.
The other law that provides regulation is the federal Truth in Lending Act (Regulation Z). In 2014, the senate bill 1314 provided new levels of protection for customers who were unable to borrow from banks and the rules for collection fees and the limits of borrowing are very stringent.
The Illinois Department of Financial and Professional Regulation (IDFPR)
is the organization that is responsible for a variety of financial products and services. The department also regulates the professionals who work in the financial industry and is there to ensure that consumers have both choice and the right information about payday loans. The regulator introduced reforms in 2005 and 2010 that made sure that customers had a 7 day cooling off period and the reforms also set limits for borrowing and interest rates.
Payday loans are legal in the state of Indiana and the regulator is the Indiana Department of Financial Institutions
. Also known as small loans, payday loans have a raft of rules and the department delivers protection to both customers and services. The Indiana Small Loan Law gives full details about the rights of borrowers and their responsibilities. Lenders in Indiana must obtain a license issued by the department.
The Iowa Division of Banking
regulates payday loans in the state. Licenses are required for lenders and these are strictly governed. This regulatory organization also covers a wide variety of financial products and services as well as the conduct of professionals who sell short term loans. Lenders must have a base which is physically present within the state.
The Office of The State Bank Commissioner
is responsible for overseeing regulations pertaining to payday loans in the state of Kansas. The Kansas Legislator Briefing Book 2015 fully covers the regulations relating to payday loans under Financial Institutions and Insurance. The organization also covers a variety of other financial products, services and the licensing of professional financial advisors and sellers.
Before passing the small loan law in 1934, Kentucky was known as the bankruptcy state. This law ended the practice of payday loan lending but it became legal again in 1992. The governing body for regulating payday loans is the Kentucky Department of Financial Institutions
. You can find out about the detailed restrictions in the regulations by looking at the article for Kentucky State.
The Office of Financial Institutions
is the regulator for lenders who offer payday loans in the state of Louisiana. Under an act called the Louisiana Deferred Presentment and Small Loan Act, regulators legislate and control all aspects of payday loans. The act gives details about the terminology, finance charges and fees, refunds if you prepay before the term is up and there is a free phone number for customers to obtain more information.
The Maine Office of Consumer Credit Regulation
oversees payday loans in the state. There are severe restrictions on this kind of loan which is only allowed through supervised lenders. All complaints and requests for information should be addressed to the regulator which has also imposed a small loan rate cap. It is fairly difficult to get a payday loan in Maine and the loans are covered by the following laws. Me. Rev. Stat. Ann. tit 9-A §1-201 and Me. Rev. Stat. Ann. tit. 9-A §1-301. There are more details in the separate article about Maine.
Lenders offering payday loans in the state of Michigan are regulated by the Michigan Department of Insurance and Financial Services
. The Deferred Presentment Service Transaction Act rules how the contract for loans is set out and this must include itemization of fees and the APR. The regulator issues a Payday Lender License and this license ensures that lenders are fit and responsible enough to conduct a legal business. In 2016 the Michigan senate allowed an expansion of payday lenders in the state.
Legal payday loans in Minnesota are overseen by the Minnesota Department of Commerce
. All lenders must comply with the Payday Lending Law which is enthroned in the Minnesota statute. The regulator is the Minnesota Attorney General. All rules and regulations for payday loans in the state can be read in the chapter on Minnesota.
The legality of payday loans in the state of Mississippi is overseen by the Mississippi Department of Banking and Consumer Finance
. In this state these financial products are known as small loans and each lender must have a small loans license. Only lenders who are physically based in the state may apply for a license.
Since 1930 payday loans have been legal in Missouri but there was no legislation for these financial products until 1991. Today the regulator for payday loans is the Missouri Division of Finance
and according to a survey it conducted in 2015, payday loans are on the decline in this state. The rules applying to payday loans in Missouri are fully covered in a separate article about the state.
The Montana Division of Banking and Financial Institutions
is the official regulator for payday loans in Montana. All lenders must be licensed by the regulator and the license must be renewed every year.
A license to operate as a payday lender must be issued for each separate location if the lenders want to operate in more than one store. The strict rules pertaining to payday loans in Montana has meant that many lenders have given up selling this type of financial product.
The Nebraska Department for Banking and Finance
is the regulator for payday loans in this state. The laws pertaining to short term loans are contained in Nebraska Revised Statutes § 45-904 and Nebraska Statutes Annotated § 45-901.
Payday loans were first introduced into the state in 1994 and all lenders are required to have a license and must be physically based in the state. Online lenders are illegal and the bond required to set up a payday loan business is very high.
The Nevada Financial Institutions Division
is the regulator for payday loans which were declared legal under the Statutory Citation: 604A.010et seq. Rules for payday loan lenders in this state are quite soft so there are numerous lenders ready to loan money. The Consumer Financial Protection Bureau wants stricter regulations put in place that give borrowers more options about repayments and to screen out those who simply cannot afford to take out a loan.
Payday loans and lenders in New Hampshire are regulated by the New Hampshire State Banking Department
. Customers can get information and make complaints through the regulator. The chapter N.H. Rev. Stat. Ann. 399-A:1 et seq. declared payday loans legal in 1999 and the state regulator imposes strict limits for interest rates and fees.
Payday loans are called small loans in New Mexico and they are licensed and regulated by provisions in the New Mexico Small Loan Act of 1955. The organization responsible for regulating small loans is the New Mexico Financial Institutions Division
. The regulator has imposed a cap on collection fees and restrictions on borrowing limits. More detailed information is available in the article specifically about this state.
Payday loans are also known as short term loans or cash advances in the state of North Dakota. They were declared legal in the North Dakota Century Code 13-08-01 et seq. The regulator is The Department Of Financial Institutions
and this body also oversees other financial services and products. Lenders must apply for a separate license if they wish to operate at different locations within the state.
The popularity of payday loans in Ohio has resulted in a plethora of lenders offering this kind of financial product. Lenders must have permission from the state to set up a business and the body responsible for regulations is the Ohio Division of Financial Institutions
. Lenders must apply for a license and the rules for payday loans cover interest rates, collection fee caps and limits on the amounts borrowed.
The Deferred Presentment Act allows businesses in Oklahoma to offer payday loans. Lenders must have a license issued by the regulator which is the Administration of the Department of Consumer Credit
. If a lender wants to operate from more than one location, a separate license is required for each set of premises.
Payday loans are legal in Oregon and are also advertised as cash advances or check loans. The Oregon Department of Consumer And Business Services
is the official regulator for short term loans. There are strict legal limits for all payday loans and cash advances which are set out in the Oregon Payday Lending Statute. Oregon also has some local government payday lending laws and you can learn more about these in the article about the state.
The Rhode Island Department of Business Regulation
oversees the payday loans business in Rhode Island. The state law R.I. Stat. Ann. 19-14.4- 1 et
seq. makes the loans legal and there are many rules to protect the rights of borrowers. This is one state where a written contract is mandatory and there are specific rules about check cashing. Look at the article about Rhode Island for more detailed information.
The Statutory Citation: Code of Laws Title 34 Chapter 39, 110 et seq. declares payday loans legal in South Caroline. Lenders are overseen by the regulatory body which is the South Carolina State Board of Financial Institutions
The law places restrictions upon the amount of loans that can be taken out. These limits prompted some lenders to operate under ‘supervised lending’ which does not have the same limits. The regulator issues a license for each lender and this must be renewed annually.
The South Dakota Division of Banking
is the official regulator for payday loans in this state. The Division comes under the Department of Labor And Regulation and ultimately under the Director Of Banking. Less restrictions on payday loans in South Dakota means that there are a lot of lenders but every lender has to have a license which must be renewed each year.
Payday loans in Tennessee are declared legal under the Tenn. Code Ann. 45-17- 101 et seq. The Department of Financial Institution
s is the official regulator and the Department’s Consumer Resources Division deals with information and any complaints from borrowers.
The Consumer Financial Protection Bureau has tried to impose stricter rules for payday loans but so far there has been little protection for borrowers from the trap of debt. Lenders must apply for a license from the Nationwide Mortgage Licensing System & Registry (NMLS).
The Texas Office of Consumer Credit Commissioner
is the official regulator for payday loans and the loans are governed by the Texas Finance Code. All lenders operating with storefront offices or online are governed by the code.
The state is one of the few that has not tightened up on laws relating to payday loans and some lenders have exploited a loophole that allows them to act as brokers which avoids the need for licensing. You can read more about this in the article about Texas.
Lenders in Utah are subject to the regulations of the Utah Department of Financial Institutions
. The regulator is in the process of tightening up regulations due to the growing amount of lawsuits that have been issued against borrowers.
Payday loans are legal in the state but only for check cashing services. Unlike some other states, lenders can take a borrower to court for non payment. There are more details about payday loans in Utah in the chapter on the state.
The Virginia Bureau of Financial Institutions
is the official regulator for payday loans which are declared legal under VA code 6.2-1800 et seq. The state has significant restrictions and as a result the number of lenders and borrowers has greatly reduced.
The laws pertaining to payday lending require each lender to have a license and the license has a requirement that the lender must have a physical presence in the state. Lending without a license is a misdemeanor. There is no provision for online loans businesses.
Payday loans are also sold as small loans in Washington. These financial transactions are overseen by the official regulator which is the WashingtonState Department of Financial Institutions
(DFI). Under the Code Title 31, Chapter 31.45, payday loans are legal and are cited as check cashers and sellers.
Lenders are all licensed and you can verify this by using an online request or by calling 1-877- RING-DFI (746-4334). Any complaints about lenders are also dealt with by the same regulatory body.
Payday loans are fully legal in Wisconsin and are declared so by the Wisconsin State Legislature, 138.14. The official regulator is the Wisconsin Department of Financial Institutions
which is a state agency.
The agency deals with all complaints, issues information and gives access to debt or consumer credit counselors. Lenders must have a license to operate but the license can be issued to cover more than one location if the business has several branches. The comprehensive legislation for payday loans is covered further in the separate article about the state.
Payday loans in the state of Wyoming are regulated by the Wyoming Division of Banking
. Regulations are not as strict as some other states and although each storefront lender requires a license, online businesses do not need to be state licensed.
The increase in popularity of payday loans in Wyoming may be due to the lax nature of the regulations surrounding short term lending. Payday lenders do not ask for credit history or scores and this has led to fast loan approval. In addition, there is no specified maximum loan amount. More details are provided in the article about Wyoming.
Summary of payday loans state regulators
This list of regulators for payday loans covers all the states in which short term loans are legal. If your home state is not listed then payday lending is illegal. If you want to know more about payday loans in your home state you can contact any of the regulators for information. Regulators play a large part in keeping a borrower safe from illegal loans and they can provide information about how to avoid the risks associated with high interest short term lending.