Payday lenders collected more than $82 million in fees from low- and middle-income Minnesotans between 1999 and 2012. Payday loans are high-fee, high-interest, short-term loans that require the borrower to pay back the loan in full by their next payday.
In 2012, 84 payday-lending stores brought in $11.4 million in fees statewide. That’s because in Minnesota a typical borrower takes out an average of 10 payday loans a year. The average annual interest on these loans? 273 percent.
A new report from the Consumer Financial Protection Bureau found that roughly 45 percent of new payday loans end up getting renewed multiple times before they’re paid off, and one in seven gets renewed more than 10 times.
Our progressive leaders are sponsoring bills to protect Minnesotans from predatory loan practices to stop the seemingly never ending cycle of borrowing money, and then borrowing more money to pay back the first loan. An interfaith group is also calling for stricter rules on payday lenders.
“It seems like people in vulnerable situations are being taken advantage of,” said the Rev. Jay Carlson of Holy Trinity Lutheran Church in south Minneapolis.
These numbers are staggering, and families across Minnesota are paying a very high price for loans designed to drastically benefit the lenders. Predatory lenders should not be able to take advantage of Minnesota families in need of help, which is why there are steps being taken to protect against this unfair practice so more Minnesotans don’t fall into this growing financial trap.