Payday loans are often advertised as “emergency aid,” but when you look at the data, nothing is further from the truth.
On average, individuals in Minnesota using payday loans take out an average of 10 loans at 208% interest, leaving them trapped in revolving payday debt for an average of five months per year. Payday loans drain the resources of individuals, families and communities.
Blue Earth County is currently the fourth per capita in Minnesota for payday loan use, and Mankato is the only town in that county with a physical store.
The average annual interest rate on site is 251%. All of this data is public information sent annually to the Minnesota Department of Commerce by payday lenders.
Currently, 18 states and the District of Columbia have restrictions protecting consumers from this predatory practice. In South Dakota, 76% voted for an interest rate cap of 36%. Nebraska was the last state to impose restrictions and protect consumers.
Research shows that states continue to advocate restrictions on credit even years later.
Tired of waiting for the state to protect consumers, some local communities have taken action. On January 1, the Moorhead Model Ordinance went into effect, capping interest rates at 33%, giving customers up to 60 days to repay their loans, and requiring all lenders to provide a detailed schedule of fees to their consumers.
The Minnesota Council of Churches and the Minnesota for Fair Lending support a statewide limit of 36% on payday loans.
I urge you to speak to your Mankato City Councilor about the need to protect the families of our community.