Low- and middle-income consumers in Minnesota paid more than $82 million in fees to payday lenders between 1999 and 2012. The new report was released this week by Minnesotans for Fair Lending, a group advocating new restrictions on payday loans. In 2012 alone, 84 payday lending stores in the state gathered $11.4 million in fees, according to data from the Minnesota Commerce Department.
The report found that payday lenders in the state make most of their money from suburban and outstate borrowers. The average payday borrower in Minnesota takes out 10 payday loans per year, at $380 each and an average annual interest rate of 273 percent. One in five customers takes out more than 15 payday loans a year. “All of this occurs because people fall into a debt trap,” said Brian Rusche, a spokesman for Minnesotans for Fair Lending. Borrowers who get caught in a debt trap take out loans repeatedly because paying off previous loans put them in a worse financial position.
Minnesotans for Fair Lending supports bills currently moving through the state legislature that aim to protect the public from predatory lending. One, sponsored by Rep. Joe Atkins (DFL-Inver Grove Heights), would limit the number of payday loans made to a single borrower to four per year. State Commerce Commissioner Mike Rothman said his agency wants to see a law that caps payday lenders’ annual interest rates at 30 percent. Attorney General Lori Swanson, meanwhile, has filed lawsuits against eight Internet lenders that made illegal payday loans to state residents.