Kansas Payday Loans: Limits, Fees and Bankruptcy Options
Kansas payday loan laws set firm limits on fees, loan size, and lender conduct. If a short loan has become debt you cannot manage, these rules may help. Bankruptcy may also help. However, your facts can change the result.
What Kansas Payday Loan Laws Cover
First, a payday loan is a cash advance of $500 or less. The lender expects one repayment, and the term runs 7 to 30 days. Also, a licensed lender must follow K.S.A. 16a-2-404. The Office of the State Bank Commissioner (OSBC) licenses them.
Fee Limits Under Kansas Payday Loan Laws
A lender may charge up to 15 percent of the cash advance. For example, a $100 loan for 14 days may cost $15. The OSBC calculates that fee as an annual rate of about 391 percent.
Kansas payday loan laws also set these limits:
- A lender may not have more than two of your loans open at once.
- A lender may not make more than three loans to you in 30 days.
- A new loan from the same lender cannot pay off an earlier payday loan.
- After the due date, the lender may charge up to 3 percent per month, plus one returned check charge. The law generally bars other fees.
Your Rights If You Cannot Repay
Kansas law gives you these protections:
- Extended payment plan: Once every 12 months, you may ask for at least four substantially equal payments. Ask before the close of business on the last business day before the due date. While you keep up, the lender cannot add interest or fees.
- Cancellation: You may cancel by the end of the next business day. You return the cash, and the lender refunds its fees.
- Written notice: Your agreement must include a bold warning in English and Spanish.
- No threats: A lender may not use or threaten criminal charges to collect.
Service members called to active duty get extra protection under K.S.A. 16a-2-405, including limits on garnishing service pay. In addition, federal law generally caps credit costs at a 36 percent annual rate for covered service members and dependents.
How to Report a Payday Lender
If a lender may have broken Kansas payday loan laws, first check its license in the OSBC lookup. Then file a complaint. A court may also award damages, a penalty of $100 to $1,000, and attorney fees for certain violations (K.S.A. 16a-5-201). However, deadlines can be short, sometimes one year, so act quickly.
When a Payday Lender Sues or Garnishes
A lender generally needs a court judgment before it can garnish your wages, according to the CFPB. In Master Finance Co. v. Pollard, 47 Kan. App. 2d 820 (2012), a $100 Missouri payday loan carried a 199.91 percent rate and led to a default judgment. By the time garnishment began in Kansas, the debt neared $5,000. The Kansas Court of Appeals said Kansas courts had to honor that judgment. Any challenge belonged in Missouri. That Missouri loan does not change Kansas payday limits. Still, explore wage garnishment options early.
Bankruptcy Options for Payday Loan Debt
Payday loans are usually unsecured, so Chapter 7 or Chapter 13 bankruptcy may discharge them. Filing also creates an automatic stay, which generally stops lawsuits, garnishments, and collection calls. Chapter 13 sets a repayment plan, usually for three to five years. Before you file, you generally must finish credit counseling.
However, lenders sometimes claim fraud when a borrower files soon after a loan. Judges decide those claims on the facts. In In re Hodges, 407 B.R. 415 (Bankr. D. Kan. 2009), the court rejected a fraud claim because the borrower had paid fees every two weeks for months. In In re Holmes, Adv. No. 18-6044 (Bankr. D. Kan. Apr. 27, 2022), borrowers filed three days after a new loan. Still, the court ruled for them because the lender showed no loss. It also said they could recover legal fees. Timing and statements to a lender can matter, so no one can promise a result.
Questions About Kansas Payday Lending Rules
Can I ignore a payday loan lawsuit?
Ignoring it is risky. A default judgment and garnishment may follow.
Do Kansas payday loan laws apply to online lenders?
They may. The Tenth Circuit upheld Kansas licensing of an online lender that solicited Kansas borrowers (Quik Payday, Inc. v. Stork, 549 F.3d 1302 (10th Cir. 2008)). However, the OSBC says it lacks authority over lenders wholly owned by a tribe. Not every lender claiming tribal status qualifies, so details matter.
Kansas payday loan laws can be complex, and every case differs. If a payday lender is pressuring you, a free strategy session with Mack & Associates can help. We can review your loan papers and explain what may fit your situation.
This article gives general information, not legal advice. Reading it does not create an attorney client relationship. Laws change, and outcomes depend on your facts.
