Proponents Call for Restrictions on “Predatory” Payday Loans | local news

Advocates of local nonprofits plan to ask Mankato City Council to impose interest rate caps on so-called “predatory” payday lenders.

Payday loans, which typically amount to $500 or less, give borrowers quick money that can be paid off in full by their next paycheck at high interest rates. Critics say the loans are targeting people in desperate situations, leaving borrowers in a “debt spiral” they can’t repay, while the companies offering them have claimed the loans are short-term loans for people with otherwise limited borrowing options .

After proponents of a statewide cap gained little ground on Minnesota legislation, proponents held a fact-finding meeting Wednesday to outline what a municipal ordinance to regulate the industry in Mankato might look like.

Minnesotans for Fair Lending, the Minnesota Council of Churches Mankato Refugee Services office, the Greater Mankato Area United Way and Exodus Lending were partners in the shared spaces event. Exodus Lending is a nonprofit organization that helps pay off people’s payday loan debt.

Lead presenter Sophia Hoiseth, a community engagement specialist at Refugee Services and organizer of Fair Lending in Mankato, said the issue needs an “advocate” on Mankato City Council.

“It would be really exciting for Mankato to be some sort of leader in the state in that regard,” she said. “And it’s within reach; it is definitely possible.”

A proposed regulation called for no more than 33% interest rate on payday loans. The average annual interest rate on payday loans in Blue Earth County in 2021 was 294%, according to data shared at the event.

Individuals would be limited to two loans of up to $1,000 per calendar year, with a minimum repayment period of 60 days, under the regulation. Borrowers in Blue Earth County took out an average of 14 loans totaling $355 in 2021, according to figures presented at the meeting.

Blue Earth County reportedly has the third highest rate of payday loans per capita in Minnesota. Payday America in Mankato is currently Blue Earth County’s only payday lending company.

Mankato would have a precedent to work by if elected officials pursued an ordinance. The city could model its ordinance along the lines of Moorhead in 2021, Hoiseth said, and licensing requirements for lenders could be similar to those imposed on tobacco and alcohol sellers.

Heidi Durand worked on the ordinance and supported it as a member of Moorhead City Council. Now a city policy expert with Minnesotans for Fair Lending, she offered advice to Mankato advocates at Wednesday’s meeting.

“I think it just needs to be made clear very, very early on that no one is forcing anyone to leave or close the doors,” she said. “All we ask is that you meet a few simple requirements.”

Before Moorhead’s regulation capping interest rates at 33% came into effect, a payday lender told Moorhead MPR News that it would make the business almost impossible to run.

While Minnesota isn’t one of them, 18 other states have either banned or limited payday loans. A lack of progress in state legislatures prompted Minnesotans to adopt a city-to-city model for fair lending.

At the Legislature, those working on the issue encountered a “mythology that payday loans or robbery loans are a problem of the urban poor,” said Meghan Olsen Biebighauser, organizer of Fair Lending for Economic Justice.

“We’ve had trouble at times gaining traction with lawmakers who weren’t in Minneapolis or St. Paul itself,” she said. “And we only know from the data we have from the Department of Commerce that it affects communities in greater Minnesota just as badly and often more than urban centers.”

After an event dedicated to disseminating the information, Hoiseth said she was confident it would generate enough interest in the topic to get results in Mankato.

“It’s something we can and will do,” she said. “It’s just about making sure the right people are hearing the right information.

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Follow Brian Arola @BrianArola

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