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Hearing Today on Bill to Reform Payday Lending in MN

PHOTO: Minnesota's faith community is leading the charge to reform the state's laws on payday loans, saying the fees and interest are unreasonable and can leave users in a cycle of debt. Photo credit: Taber Andrew Bain
PHOTO: Minnesota's faith community is leading the charge to reform the state's laws on payday loans, saying the fees and interest are unreasonable and can leave users in a cycle of debt. Photo credit: Taber Andrew Bain
February 26, 2014

ST. PAUL, Minn. - Among the bills set for hearings on this second day of the 2014 legislature is one that would reform Minnesota's laws on payday lending. The number of such loans in the state has more than doubled over the past five years.

Brian Rusche, executive director of the Joint Religious Legislative Coalition, said the loans are made without any real regard to a person's ability to pay them back.

"And so repeat lending becomes typical," he said. "The average payday borrower in Minnesota takes out 10 payday loans, so they're in debt for nearly half a year at interest rates that range from 270 to 300 to 400 percent APR. It's an extremely predatory product."

The legislation would require payday lenders to use basic underwriting standards and would cap the number of loans they could make to one person in one year. The changes are opposed by the payday-loan industry, which says it fills a need for those who have cash emergencies or can't qualify conventionally.

With the fees and interest, Rusche said, the loans go past what is reasonable - which is why the faith community in Minnesota is taking such a strong stand.

"There's a lot of teachings in our religious texts of not taking advantage of somebody that's in financial stress," he said, "and the payday loan is clearly usurious, and this is really a case where an industry is taking extreme advantage of people that need help."

The legislation being heard today began to take form more than two years ago as Holy Trinity Lutheran Church started to look into the impact of payday loans on its neighborhood in south Minneapolis. Parish organizing leader Meghan Olsen Biebighauser said they found that the loans were catching many of the most vulnerable in a cycle of debt and extracting wealth from the community.

"Their business model is predicated on making sure that people take out repeat loans and are in debt for a very long time," she said. "So this money that families would have to sort of build their assets is just continually going to pay the lender."

This afternoon's hearing is before a House committee on commerce and consumer protection.

Data on payday lending in Minnesota is online at jrlc.org.

John Michaelson, Public News Service - MN