Payday lending can trap Minnesotans in a cycle of debt, and advocates are championing legislation that would reform the practice and help ensure low-income people aren’t pushed further into hardship because of lack of access to responsible financial products.
Payday loans are small, but very high-interest loans that have to be repaid in a very short period of time. Many borrowers find they are unable to repay the loans and must take out additional loans. According to Minnesotans for Fair Lending, “The typical payday loan borrower in Minnesota is indebted by payday loans for more than half of the year, taking out an average of ten payday loans per year – at triple digit interest rates that, depending on the loan, can exceed 800%.”
A bill (House File 2293) to restrict payday lending passed the House floor recently, and the Senate’s version is ready to be taken up on the Senate floor.
The House’s bill has several provisions, including:
- Requirements to make sure people are able to repay the loans before they’re allowed to borrow.
- A limit on the number of payday loans a person can take each year.
- An interest rate cap that lenders must follow when borrowers have taken out multiple payday loans.
This effort is an important step in continuing to make our state a place where all Minnesotans can have access to financial products that don’t take away their resources to build assets and climb the economic ladder.