AT THE CAPITOL: Limit payday loans? - New York News

AT THE CAPITOL: Limit payday loans?

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ST. PAUL, Minn. (KMSP) -

The Minnesota House took a big vote on Thursday that could bring major regulatory changes for short-term payday loans out of concern that interest rates are too high, thus taking advantage of people in need.

The lending practices at the center of the debate are the short-term, under-$1,000 loans that people often take out in emergencies, but the fees can top 350 percent of the original loan.


EXAMPLE: A 14-day loan for $100 will come with a $15 fee, which works out to an annual interest rate of 391 percent.

Rep. Joe Atkins said typical clients of payday loan providers will take out 10 loans annually, and he -- along with many other Democrats -- argue those exchanges create a cycle of indebtedness.

There are many short-term loan providers throughout the metro, but the House bill would limit lenders to just four loans a year for any one borrower and would also prevent lenders from giving a payday loan to anyone who already owes more than 41 percent of their income to other debts and obligations, such as housing.

Republicans argue the bill is far too restrictive on consumers, and they contend that limiting options won't stop problem.

"We're not stopping this behavior," Rep. Sarah Anderson argued. "All you're doing is pushing them to a place where they have nobody to protect their rights."

Rep. Kurt Zellers, who is currently running for governor, said payday customers who hit their annual limit will be forced to turn online.

"That is the wild, wild west," Zellers said. "That is where people are being taken advantage of."

Atkins, however, disagreed.

"Actually, the Internet is not unregulated. We have some regulated, licensed lenders over the Internet here in Minnesota, and if people want to turn to them, that's appropriate as well."

According to Atkins, the main intent of the bill is to prevent customers from becoming caught in a debt trap.

"In some cases, they're paying as much in interest as they are for the loan itself," he said.

36% INTEREST CAP FOR MILITARY FAMILIES

The bill also limits short-term loan interest rates to 36 percent for active-duty service members and their immediate family members.

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