Summary: A lender that operates in many states has a different rulebook in each one: a different maximum loan, a different maximum term, a different rule on renewals, and in some states an income test. Keeping every loan inside those limits means writing each state’s rules as checks that run on each application and each servicing event. Nevada’s deferred deposit loan statute shows what those checks look like.
How much state rules differ
The National Conference of State Legislatures keeps a summary of state payday lending statutes. Its page, last updated February 28, 2023, says: “Thirty-seven states have specific statutes that allow for payday lending. Eleven jurisdictions do not have specific payday lending statutory provisions and/or require lenders to comply with interest rate caps on consumer loans: Connecticut, Guam, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Puerto Rico, Vermont, Virgin Islands and West Virginia.”
The table under that summary shows how little the thirty-seven have in common. Alabama caps loans at $500 for a term of “Not less than 10 days and not more than 31 days”. In California, “The face amount of the check shall not exceed $300.” Colorado sets a minimum term of six months and a finance charge that “must not exceed an annual percentage rate of 36%.” North Dakota caps a single loan at $500 and all outstanding obligations from one customer at $600.
The variables differ, not only the numbers. And the summary is dated. States amend these chapters often, so the statute itself is the source for any check a lender builds.
Worked example: Nevada NRS 604A
Four sections of Nevada’s chapter 604A cover the checks lenders most often get wrong.
The income test. NRS 604A.5017(1): “A licensee who operates a deferred deposit loan service shall not make a deferred deposit loan that, in combination with any other outstanding loan of the customer, exceeds 25 percent of the expected gross monthly income of the customer when the deferred deposit loan is made.” Subsection 2 gives the lender a defense if two things are true: the customer “presents evidence of his or her gross monthly income to the licensee and represents to the licensee in writing” that the loan is within the limit, and the licensee “has utilized the database established pursuant to NRS 604A.303” to confirm the combined balance. A signed income statement without the database check does not satisfy the subsection.
The term. NRS 604A.501(1): “Except as otherwise provided in this chapter, the original term of a deferred deposit loan must not exceed 35 days.” Subsection 2 adds an outer bound: a licensee “shall not agree to establish or extend the period for the repayment, renewal, refinancing or consolidation of an outstanding deferred deposit loan for a period that exceeds 90 days after the date of origination of the loan.”
One loan at a time. NRS 604A.5018(1) bars a second deferred deposit, single-advance or high-interest loan “to the same customer at one time or before any outstanding balance is paid in full on an existing loan made by that licensee to the customer unless” four conditions hold, including that the loans together “do not exceed the limits set forth in NRS 604A.5017”.
Extensions paid with a new loan. Under NRS 604A.5029(1), when a new loan pays off an old one, the licensee “shall not establish or extend the period beyond 60 days after the expiration of the initial loan period” and may not add unpaid interest or other charges from the old loan to the new principal.
Here is how those sections play out on one file. The numbers are fictional and rounded.
Example. A customer shows pay stubs for $3,200 of expected gross monthly income. Twenty-five percent is $800. The state database shows an outstanding $350 loan from another licensee, so the most this lender can advance is $450. The customer asks for $500; that fails the income test. The lender writes a 35-day loan for $450, with the written representation and the database query on file. On day 35 the customer cannot pay and asks to refinance with a new loan. Under 604A.5029 the new period may run no later than 60 days after day 35, which is day 95. But 604A.501(2) stops every extension at 90 days after origination, so the binding limit is day 90. The unpaid fee from the first loan cannot be rolled into the new principal.
Where errors creep in: online channels, state of residence, renewals
Online channels and state of residence. An online lender has to decide which state’s rules apply to each borrower. Nevada answers that in the statute. NRS 604A.579: “A licensee that offers deferred deposit loan services through an Internet website must be licensed in each state, as applicable, where any of its customers reside and shall comply with any state or federal law or regulation applicable to such jurisdiction.” The borrower’s state of residence is therefore an input to every other check, and it has to be captured and verified before the rule set is chosen.
Renewals and refinances. Origination rules are usually built into the application flow. Extension rules fire later, in servicing, often in a different system. The 90-day limit in 604A.501(2) and the no-capitalized-interest rule in 604A.5029(1) only matter weeks after funding, when a payment is missed and someone offers a new loan. If servicing does not carry the origination date and the original fee forward, those checks cannot run.
Aggregate balances. Tests like Nevada’s 25 percent rule and North Dakota’s $600 cap count loans from other lenders. The state database query, and the fact that it ran before funding, has to be part of the loan record.
Writing state rules so they can be checked
A policy binder describes a rule; a check names its inputs, its threshold and its evidence. A workable format has five parts: the citation, the fields it reads, the comparison, the exception, and the evidence that proves the inputs. Nevada’s income test, written that way:
- Citation: NRS 604A.5017(1) and (2).
- Inputs: requested principal, expected gross monthly income, outstanding balances from the state database, the customer’s written income representation.
- Comparison: requested principal plus outstanding balances is no more than 25 percent of expected gross monthly income.
- Exception: none on the limit itself; the subsection 2 defense requires both the written representation and the database query.
- Evidence: the pay stub or bank deposit, the signed representation, and the database query with its timestamp before funding.
Written this way, the same rule runs at origination, again on an additional loan under 604A.5018, and again on a refinance under 604A.5029. The term rules get the same treatment, with origination and maturity dates as inputs and 35 and 90 days as thresholds. Repeat for each state, and the binder becomes a rule set with one entry per state per test, each tied to the section it came from.
Record the date each rule was last checked against the current statute text, and log every exception with the rule that fired and the evidence it read.
How the automated version works
MightyBot is an AI agent platform for lending and finance. On the platform, each state’s rules are written in plain English, in the form above, and agents check every application and every servicing event against them. For a Nevada file, the agent reads the income evidence, the database result and the loan dates, applies the 25 percent test and the 35-day and 90-day limits, and cites the page or transaction behind each finding. Loans that fail a check are routed to a person for a decision.
See compliance monitoring and the policy engine for how rules are written and applied.
