Payday loans are often advertised as “emergency relief,” but if you look at the data, it couldn’t be further from the truth.
On average, people in Minnesota who use payday loans take out an average of 10 loans with the equivalent of an interest rate of 208%, trapping them in revolving payday debt for an average of five months each year. Payday loans drain the resources of individuals, families and communities.
Blue Earth County is currently Minnesota’s fourth largest per capita in payday loan usage, and Mankato is the only city in that county with a physical store.
The local average annual interest rate is 251%. All of this data is public information submitted annually by payday lenders to the Minnesota Department of Commerce.
Currently, 18 states and the District of Columbia have restrictions that protect consumers from this predatory practice. In South Dakota, 76% voted in favor of a 36% interest rate cap. Nebraska was the latest state to add restrictions and protect consumers.
Research shows that states continued to support restrictions on lending years later.
Tired of waiting for the state to protect consumers, some local authorities have taken action. On January 1, the Moorhead Model order began, capping interest rates at 33%, giving customers up to 60 days to repay their loan and requiring all lenders to give their consumers an itemized list of charges.
The Minnesota Council of Churches and Minnesotans for Fair Lending support a 36% cap on statewide payday loans.
I urge you to speak to your local council member in Mankato about the need to protect families in our community.