Borrowing in Washington, D.C.: What the Law Allows

How D.C. shut out payday lenders

Two rules work together. First, D.C. Code section 28-3301 limits interest on a written loan agreement to 24% a year. A typical two-week payday fee works out to an APR in the hundreds of percent, far over that line. Second, the Payday Loan Consumer Protection Amendment Act of 2007 removed the old provision for payday lending, and section 26-319 now says no licensed check casher may "cash or advance any monies on a post dated check."

No D.C. law authorizes car title loans either, and the same 24% ceiling applies. If an online lender offers you a payday or title loan as a D.C. resident, treat it as a red flag. The 24% limit is written to reach consumer credit transactions with District residents when the creditor receives your signed agreement or offer.

What lenders may charge

The 24% ceiling is the headline number for personal loans in the District. The statute carves out some larger loans: when the borrower receives more than $2,500 and the loan meets certain conditions, the parties may agree to a higher rate. Loans secured by a mortgage or deed of trust on your home are kept under the limits.

Nonbank consumer lenders need a license from the Department of Insurance, Securities and Banking (DISB), which regulates money lenders under Title 26 of the D.C. Code. Banks chartered elsewhere can often lend at their home state's rates, so an online bank loan may carry a higher APR than 24%. The APR on the disclosure is what matters; our guide on APR vs. interest rate explains why fees push it above the note rate.

The three-year clock on debts

D.C. Code section 12-301 gives a creditor three years to sue on a simple contract, written or oral. That covers most consumer debts, including credit cards and personal loans. Only instruments under seal get a longer, 12-year period, and consumer loan agreements rarely qualify.

Three years is short compared with most states, which makes it worth checking dates before you respond to a collector about an old account. A payment or a written acknowledgment can affect the timing, so read how statutes of limitations work first.

How much of your pay is protected

Under section 16-572, as amended by the Wage Garnishment Fairness Amendment Act of 2018, a creditor with a judgment can garnish only 25% of the amount by which your weekly disposable wages exceed 40 times the D.C. minimum hourly wage. The federal rule uses 30 times the much lower federal minimum wage and takes up to 25% of all disposable earnings, so D.C. protects considerably more.

The D.C. Code's notes on this amendment record both a funding condition and a later budget act that gave it effect. If your pay is garnished, ask the court clerk or a legal services provider which calculation was used.

Getting help in the District

1. 1 Verify a lender through DISB or NMLS Consumer Access before you share bank details.
2. 2 File a complaint with DISB's Consumer Services Division if a lender charges more than the law allows or won't give you your documents.
3. 3 Report abusive collection to the D.C. Attorney General's consumer protection office or the CFPB, and know your rights with debt collectors.

Common questions