Religious group seeks payday lending regulations

Rusche

By Don Davis

Payday loan companies need more state regulation to keep poor Minnesotans out of a “debt trap,” the Joint Religious Legislative Coalition says.

“The vast majority of payday borrowers are caught in a trap with the first loan,” the group’s executive director, Brian Rusche, said Tuesday, urging state leaders to pass a regulation law next year.

Rusche said the average payday user takes out 10 a year and can pay more than a 1,000 percent annual interest rate when several loans are received.

Anna Brelje of Minneapolis said she ran into financial difficulties a decade ago when afflicted with a medical problem. She told a Tuesday news conference that she ended up “every two weeks reborrowing, but never escaping the trap.”

She ended up paying $2,000 in interest before getting out of the downward financial spiral, she said.

Payday loans are taken out with the assumption of payback when the next paycheck arrives.

The religious coalition wants legislators to pass a bill allowing just four payday loans a year per person, regulating all payday loans the same way (something not done now), requiring payday lenders to ask about military status because federal payday loan rules to military personnel are strict and to require sound underwriting of the loans.

The Community Financial Services Association of America, a group of some payday lenders, says the loans are good deals and handled well.

“The typical fee charged by payday lenders is $15 per $100 borrowed, or a simple 15 percent for a two-week duration,” the association reports. “The only way to reach the triple digit APR (annual percentage rate) is to roll the two-week loan over 26 times (a full year).”

The association says that bounced-check fees are more expensive than payday loans.

Members of the financial group limit themselves to giving a person four loans a year, the association reports.

Rusche said people should not feel forced into taking out payday loans. He said that they can look to more traditional lending institutions, sell personal items, cut spending or turn to religious organizations, some of which now are looking into ways to help those who otherwise would use payday lenders.

He said that even credit cards offer a better interest deal.

A Pew Charitable Trusts survey last year showed 27 states have almost no payday loan regulations, while 15 basically ban them. The other states, including Minnesota, have some regulations.

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