SHB 2361
In CommitteeHouse
Small loans maximum amount
Concerning the maximum principal amount of small loans.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill raises the maximum small loan amount to $1,200 (or 30% of a borrower’s monthly income), adjusts that cap annually for inflation, and tightens limits on how often borrowers can take out loans. It also strengthens fee caps and restricts lenders from lending to borrowers in default or who’ve exceeded the annual loan limit.
- Raises the maximum small loan amount from $700 to $1,200, or 30% of the borrower’s gross monthly income, whichever is lower.
- Requires the Department of Financial Institutions to adjust the $1,200 cap annually starting January 1, 2027, based on inflation using the Seattle-area consumer price index.
- Limits borrowers to no more than eight small loans per 12 months across all lenders.
- Bars lenders from making new loans to borrowers who are in default on a prior small loan (unless two years have passed or the loan is paid in full).
- Caps fees and interest at 15% on the first $500 of loan principal and 10% on any amount over $500 (applied across all loans to one borrower).
- Prohibits lenders from accepting anything other than a single postdated check as collateral for a small loan, and bans cashing/postdating checks for cash advances without a small loan endorsement.
Who is affected
- Small loan borrowers — People who rely on short-term, small-dollar loans for emergency expenses or cash flow gaps; they may benefit from higher loan limits and clearer rules on repayment timing, but also face stricter limits on how often they can borrow.
- Small loan licensees — Licensed lenders who offer small loans (e.g., payday loan stores); they must adjust their lending practices to comply with new loan limits, fee caps, and borrowing frequency rules.
- State regulatory agencies — State agencies responsible for regulating consumer lending; specifically, the Department of Financial Institutions will now calculate and publish annual inflation-adjusted loan limits.
- Check-cashing customers — Low- and moderate-income households who may use check-cashing services; they are affected because the bill extends small loan rules to postdated checks used for cash advances without a purchase.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Raising the cap from $700 to $1,200 (or 30% of income) and indexing it to inflation gives borrowers more breathing room for larger emergencies—e.g., car repairs, medical co-pays—reducing the need for repeated short-term borrowing cycles that trap people in debt.
FinancialPeopleRef: RCW 31.45.073(2)(a)The 8-loan-per-year cap and the prohibition on lending to borrowers in default significantly reduce the risk of debt spirals—data from other states with similar caps show reductions in repeat borrowing and delinquency, especially among low-income borrowers.
FinancialPeopleRef: RCW 31.45.073(4)The fee/interest cap (15%/10%) lowers the effective APR for most borrowers—e.g., a $1,000 loan over 45 days would cost ~$175 in fees/interest (17.5% for the term), compared to typical Washington payday loans at 15% *per month*, which can exceed 180% APR—making credit more transparent and affordable.
FinancialPeopleRef: RCW 31.45.073(5)Prohibiting lenders from making new loans to borrowers in default (unless 2 years have passed) reduces the risk of violent collection tactics and overdraft fees—many borrowers in default face repeated bank rejections, bounced checks, and financial stress that can escalate to safety risks.
Public SafetyPeopleRef: RCW 31.45.073(2)(a)Restricting collateral to one postdated check and banning cash advances on checks without a loan endorsement reduces predatory check-cashing practices—many low-income households are charged high fees for “cash advances” that function like unregulated loans, often trapping them in cycles of debt.
Business & EmploymentPeopleRef: RCW 31.45.073(6)
Potential Concerns (5)
The $1,200 loan cap (or 30% of monthly income) may still be too low for many low- and moderate-income borrowers facing larger emergency expenses (e.g., car repairs, medical co-pays), limiting their ability to cover real-world needs without multiple loans—despite the cap increase from $700, the real-world purchasing power remains constrained for households with irregular or low income.
FinancialPeopleRef: RCW 31.45.073(2)(a)The 8-loan-per-year cap may restrict access to credit for borrowers with chronic cash-flow instability—e.g., those with seasonal work, gig economy jobs, or ongoing medical needs—who may need more frequent, smaller loans to manage recurring shortfalls, potentially pushing them toward unregulated or illegal lenders.
FinancialPeopleRef: RCW 31.45.073(4)The fee/interest cap (15% on first $500, 10% on remainder) may reduce lender participation in the small-loan market, especially among smaller or rural lenders, potentially decreasing physical access to regulated credit in underserved areas—though this may reduce predatory practices, it could also increase reliance on alternative, less-regulated sources.
FinancialPeopleRef: RCW 31.45.073(5)The 30% of gross monthly income cap may disproportionately burden renters in high-cost areas (e.g., Seattle, Tacoma) where housing cost burdens already exceed 30% of income—borrowers may be unable to take full advantage of the $1,200 cap if their income is low, effectively capping them at a lower real-world loan amount.
HousingLean peopleRef: RCW 31.45.073(2)(a)Restricting collateral to a single postdated check may reduce lenders’ willingness to serve high-risk borrowers (e.g., those without steady direct deposit), potentially increasing reliance on informal or unsafe credit sources, though this also reduces the risk of check hoarding and overdraft cascades.
Public SafetyLean peopleRef: RCW 31.45.073(6)
Who Is Most Affected
Low- and moderate-income borrowers who rely on small-dollar credit for emergencies—this group benefits most from higher loan limits, fee caps, and borrowing frequency limits, reducing debt traps and overdraft fees.
Licensed small lenders (especially regional or independent operators) may face reduced revenue per loan and tighter operational constraints, but the standardized fee caps and borrowing limits may also reduce default-related collection costs and regulatory risk.
Check-cashing customers—especially those without bank accounts—benefit from the ban on unregulated cash advances on postdated checks, which often function as high-cost, unlicensed loans with no consumer protections.
The Department of Financial Institutions gains clearer authority and a modest administrative role in annual inflation adjustments—costs are minimal, and the agency strengthens its consumer protection mandate.