Personal Loans in Connecticut: What Licensed Lenders May Charge

How the Connecticut caps work

Section 36a-558(d)(1) of the Connecticut General Statutes sets two flat caps by loan size. Section 36a-555 says the APR is calculated under the federal Military Lending Act, not the Truth in Lending method, so it counts more charges, such as credit insurance and ancillary products. The Department of Banking's guidance on Public Act 23-126 adds that any fee charged in connection with a small loan, voluntary or not, counts as a finance charge.

The examples assume no fees, since any fee would have to fit under the same cap. They are examples, not offers. The National Consumer Law Center, which compares state caps, puts the Connecticut ceiling at 36% APR for a $2,000 two-year loan and 25% for a $10,000 five-year loan, fees included.

Who needs a license, and the 2023 anti-evasion law

Section 36a-556 requires a small loan license from the Banking Commissioner to make a small loan to a Connecticut borrower, or to offer, broker, arrange, generate leads for, service, buy or advertise one, whether in person, by phone or online. Public Act 23-126 raised the loan limit from $15,000 to $50,000 on October 1, 2023, and added Section 36a-556(d), which aims at bank partnerships.

• Predominant economic interest: a company that holds, acquires or keeps most of the economic interest in a loan made by a bank needs a license.
• Purchase rights: so does a company that markets, arranges or facilitates the loan and has the right or duty to buy it or interests in it.
• Totality of the circumstances: so does a company that is in substance the lender, where the deal is structured to evade the law.
• Banks and credit unions lending in their own right remain exempt, and payday and title loans are covered by our sister site Lendmira on its Connecticut lending laws page.

A small loan that breaks these rules is unenforceable: the lender may not collect principal, interest or other charges, with narrow exceptions for clerical errors.

Late fees, prepayment and other borrower rights

• Late fee: only after an installment is unpaid for 10 or more consecutive days, and no more than the lesser of 5% of the installment or $25 a month. No interest may be charged on it.
• Returned payment: a fee of no more than $20.
• Prepayment: a small loan may not carry a prepayment penalty.
• Banned terms: a rate increase on default (except open-end loans), adjustable rates, balances that grow, class-action waivers and fees the law does not list.

Late fees and returned payments explains how to find these terms in your agreement.

How Connecticut compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan from a licensed non-bank lender, Massachusetts and Rhode Island cap the loan at about 24% APR and New York at 25%, below Connecticut's 36%. For a $10,000 five-year loan, Massachusetts caps it at about 20%, Rhode Island at about 21% and New York at 25%, close to Connecticut's 25%. The state rules map shows every state side by side.

Check a lender and file a complaint

1. 1 Verify the license with the Department of Banking's Verify a License page or NMLS Consumer Access before you apply. Lead generators and servicers need a license too.
2. 2 Keep the loan papers: the Truth in Lending disclosure, the agreement and any messages about fees or add-on products.
3. 3 File a complaint with the Department of Banking's Consumer Affairs Unit using its online consumer assistance form; it handles small loan complaints.
4. 4 Send a complaint to the CFPB as well if the lender is a bank or a bank partner; the department refers complaints about federally chartered banks to their federal regulators.

Questions people ask