Are tribal loans legal in New York?
Effectively no. New York has pushed tribal lenders out.
DFS 2013 crackdown ordered banks/ACH networks to block tribal payday debits; 16% civil / 25% criminal usury — effectively eliminated.
Key change: 2013.
The law in New York
- Rate cap
- 16% civil usury cap for unlicensed non-bank consumer loans of $25,000 or less (Banking Law § 340); loans above 25% are criminal usury (Penal Law § 190.40).
- Key law
- New York Banking Law § 340 (16% civil usury) and Penal Law § 190.40 (25% criminal usury).
- Enforcement
- In August 2013, DFS Superintendent Benjamin Lawsky sent cease-and-desist letters to 35 online payday lenders and asked NACHA and 100+ banks to "choke off" ACH access. In Otoe-Missouria Tribe v. NYDFS (2d Cir. 2014), the court let New York regulate tribal-affiliated online lending.
In 2013, NYDFS ordered banks and the ACH network to block debits for 35 illegal online payday lenders — some found charging over 900% APR (up to 912.49% in the Otoe-Missouria case).
What it means for you
Payday and tribal high-cost loans are illegal and unenforceable in New York, and the state actively cuts off the payment rails used to collect them. Loans above the criminal-usury rate are void.
If you already borrowed in New York
A loan that violates New York's ban may be partly or fully unenforceable — which changes your options with the lender and any collector. This is general information, not legal advice.
- File a complaint with the New York Department of Financial Services (NYDFS) and the NY Attorney General.
- Because unlicensed loans over 16% are usurious (and over 25% criminally usurious/void), dispute the debt and revoke any ACH authorization with your bank.
Frequently asked questions
Are tribal loans legal in New York?
No, not in any practical sense. New York has pushed high-cost lenders out, and a tribal loan made to a New York resident is frequently void or uncollectable. Payday and tribal high-cost loans are illegal and unenforceable in New York, and the state actively cuts off the payment rails used to collect them. Loans above the criminal-usury rate are void.
What is the maximum legal interest rate in New York?
16% civil usury cap for unlicensed non-bank consumer loans of $25,000 or less (Banking Law § 340); loans above 25% are criminal usury (Penal Law § 190.40). The controlling law is the New York Banking Law § 340 (16% civil usury) and Penal Law § 190.40 (25% criminal usury). Tribal lenders argue this cap does not bind them because they answer to tribal law — that argument is exactly what state enforcement and private litigation have been testing.
Can a tribal lender sue me or collect in New York?
In August 2013, DFS Superintendent Benjamin Lawsky sent cease-and-desist letters to 35 online payday lenders and asked NACHA and 100+ banks to "choke off" ACH access. In Otoe-Missouria Tribe v. NYDFS (2d Cir. 2014), the court let New York regulate tribal-affiliated online lending. Sovereign immunity protects a lender from being sued; it does not give it extra power to collect from you, and it does not override New York law on whether the debt is enforceable in the first place. Threats of arrest are always false.
Do I still owe a tribal loan taken out in New York?
Possibly not — and this is the question worth answering before you pay anything more. Where a loan exceeds New York's limits it may be void or uncollectable regardless of what you signed. Get the answer before you keep paying, and check whether your lender is one of the closed brands whose balances were cancelled in a settlement.
Who do I complain to about a tribal lender in New York?
File a complaint with the New York Department of Financial Services (NYDFS) and the NY Attorney General. Because unlicensed loans over 16% are usurious (and over 25% criminally usurious/void), dispute the debt and revoke any ACH authorization with your bank. You can also file with the federal CFPB, which accepts complaints about tribal lenders regardless of your state.