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Protection for Low-income Consumers
Goal: Support the passage of reform legislation that limits the interest rates, fees and penalties at payday lending institutions.
2010 Outcome: The PayDay lending reform bill passed the House Labor & Consumer Protection Division and the House Commerce Committee this session. The bill had a more difficult road in Senate committees and never received a hearing. While it did not advance further this session, significant progress was made that sets the bill up well for next year.
Background: People living in poverty seldom use traditional banking institutions because their financial situation makes savings and checking accounts unnecessary. Frequently, they depend on so-called “payday lending” institutions for loans to pay for home and auto repairs, health care bills and other financial needs.
A small number of lenders make the vast majority of payday loans in Minnesota. In 2008, 32 licensed companies made 231,000 loans to Minnesota consumers. While allowable interest rates for payday loans are already exorbitantly high (up to 390% APR), some companies have discovered a loophole in the law that permits them to charge significantly higher rates for exactly the same loan, raising interest rates as high as 2,145% APR.
In collaboration with other economic justice advocacy organizations, Catholic Charities will advocate for policies that close the loophole and require that all payday lenders follow the rate structure that the Legislature established for payday loans under the 1995 Consumer Small Loan Act.
Legislative Priority:
- Support the passage of reform legislation that limits the interest rates, fees and penalties at payday lending institutions
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