Local nonprofit advocates plan to ask the Mankato City Council to impose interest rate caps on what they call “predatory” payday lenders.
Payday loans, which are typically $500 or less, give borrowers quick cash to pay off in full at a high interest rate on their next paycheck. Critics say the loans target people in dire straits, luring borrowers into ‘debt spirals’ they are unable to repay, while companies offering them have claimed they are loans short-term for people with otherwise limited credit options.
After gaining little ground on a statewide cap with the Minnesota Legislature, attorneys held a briefing on Wednesday to outline what a city ordinance regulating the industry in Mankato might look like. .
Minnesotans for Fair Lending, Minnesota Council of Churches Mankato Refugee Services Office, United Way of Greater Mankato Area and Exodus Lending partnered with the event at Shared Spaces. Exodus Lending is a non-profit organization that helps pay off people’s payday loan debt.
Lead presenter Sophia Hoiseth, a community engagement specialist at Refugee Services and Fair Lending’s Mankato organizer, said the issue needed a “champion” on Mankato City Council.
“It would be really exciting for Mankato to be some kind of state leader on this,” she said. “And it’s close at hand; It’s entirely possible.”
A draft order provided no more than a 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.
People would also be limited to two loans of up to $1,000 per calendar year under the order, with a minimum repayment period of 60 days. Blue Earth County borrowers took out 14 loans averaging $355 in 2021, according to figures provided at the meeting.
Blue Earth County is said to have the third highest rate of payday loans issued per capita in Minnesota. Payday America in Mankato is the only current payday loan company in Blue Earth County.
Mankato would have a precedent to work on if the elect were to pursue an order. The city could model its ordinance on what Moorhead passed in 2021, Hoiseth said, and licensing requirements for lenders could resemble those for tobacco and liquor sellers.
Heidi Durand worked on and supported the ordinance as a member of Moorhead Town Council. Now a municipal policy specialist with Minnesotans for Fair Lending, she offered advice to Mankato advocates at Wednesday’s meeting.
“I think it just needs to be clarified very, very early on that no one is forcing anyone to leave or close their doors,” she said. “We just ask to follow a few simple requirements.”
Before Moorhead’s order capping interest rates at 33% came into effect, a Moorhead payday lender told MPR News it would be nearly impossible to run the business.
While Minnesota isn’t among them, 18 other states have banned or capped payday loans. The lack of progress among state lawmakers prompted Minnesotans for Fair Lending to pursue a city-to-city model.
In the Legislative Assembly, people working on the issue have come up against a “mythology that payday lending or predatory lending is an urban poor problem,” said Fair Lending for Justice organizer Meghan Olsen Biebighauser. economic.
“We sometimes had a hard time imposing ourselves with lawmakers who weren’t in Minneapolis or St. Paul proper,” she said. “And we just know from the data we have from the Department of Commerce that it affects communities in Greater Minnesota just as much and often more than urban centers.”
After an event focused on disseminating information, Hoiseth said she was confident it would spark enough interest in the issue to produce results in Mankato.
“It’s something we can and will do,” she said. “It’s just about making sure the right people hear the right information.
Follow Brian Arola @BrianArola
Follow Brian Arola @BrianArola