St. Paul, Minnesota – With President Trump and Congress discussing a national cap on loan interest rates, the Center for Responsible Lending and Minnesota-based Exodus Lending today released a timely report on a recently enacted state rate cap, “Escape from the Debt Trap: Relief for Minnesotans After State Ends Payday Lending.” Minnesotans had been charged a 220% Annual Percentage Rate (APR) on the typical storefront payday loan, but this predatory form of credit ended in 2024 when a strong interest rate cap went into effect.

“Payday lenders can no longer drown underpaid, low-income Minnesotans in debt,” said Lucia Constantine, report co-author and senior researcher at the Center for Responsible Lending. “Without these debt traps, Minnesotans are better positioned to meet essential expenses, build an emergency fund, and achieve greater financial stability.”

The report features focus groups of former payday loan borrowers from across Minnesota. The report’s key findings are:

  • Storefront payday lending exacerbated financial instability and imposed significant emotional burdens on Minnesota borrowers.
  • Borrowers demonstrate adaptive strategies in the absence of storefront payday lending.
  • Online lenders continue illegally targeting financially vulnerable Minnesotans.
  • Borrowers express relief that storefront payday lending is gone and show strong support for continued regulation.

Meghan Olsen Biebighauser, report co-author and policy and partnerships director at Exodus Lending, said, “Payday lenders had wreaked havoc on many Minnesotans’ lives. The departure of these predatory lenders will bring monetary and emotional relief to Minnesota families. This usury law is a victory for people over predatory lending, and it was enacted with the support of a broad coalition putting in the work. Enforcing our rate cap will require continued vigilance.”

Background

Prior to 1995, Minnesota effectively prohibited payday lending with an interest rate cap of 36% APR. That year, the state removed the cap and payday lenders began operating. Through the years, these lenders exploited loopholes, expanded their operations, and took tens of millions of dollars in fees from Minnesotans who could least afford it.

This report tells the story of grassroots organizing and advocacy at the city and state level in favor of stopping the payday loan debt trap. In 2023, these efforts culminated with the enactment of a measure capping the APR on payday loans to 36% — with strict limitations on loans bearing annual rates from 37% to 50%. The new law included key measures to protect against attempts to evade these protections, based on the evolving landscape of online predatory lending and insights from other states. The rate cap was implemented in January 2024. Storefront payday lenders chose to end their operations throughout the state, rather than comply with the rate limit. With these extractive creditors gone, Minnesotans are projected to save more than $4.5 million in fees annually — funds that can be used to support households, build financial stability, and bolster local economies.

Twenty-one states, including Minnesota, along with the District of Columbia limit payday lenders to around 36% APR or lower, a cap that stops these lenders from trapping people in debt.

To read the new report and watch a “Behind the Report” video, go to: “Escape from the Debt Trap: Relief for Minnesotans After State Ends Payday Lending.”

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Press Contacts

About Exodus Lending
Exodus Lending works with Minnesotans to advance economic justice through consumer lending, community organizing, and advocacy.

About The Center for Responsible Lending
The Center for Responsible Lending is a non-partisan, nonprofit research and policy advocacy organization working to promote financial fairness and economic opportunity for all, end predatory lending, and close the racial wealth gaps.