By Don Davis
The average Minnesotan could be limited to receiving four payday loans a year.
The Minnesota House approved that restriction 73-58, with most Democrats in favor and most Republicans opposed. The bill would limit interest rates on loans to some specific types of people to 36 percent annually.
A similar bill awaits a Senate vote.
Rep. Joe Atkins, D-Inver Grove Heights, said his bill is designed to save Minnesotans from what he described as up to 800 percent interest some pay on payday loans during a year. “Payday loans in small doses are OK, but too many of them will kill you.”
Payday loans are bad for Minnesotans, Rep. Ben Lien, D-Moorhead, said. “They lead to long-term revolving debt.”
At Unloan Corp., a payday lender, the average customer takes out 16 loans a year, Atkins said. Many payday lenders are taking advantage of people, he said.
“They have fallen on hard times, that is all,” Atkins said of customers. “They are not idiots, but they are treated like idiots. … All this bill says is we should treat those folks as we treat ourselves and our friends.”
Representatives amended the bill to give more flexibility to military personnel, people paying off student loans and others. They also limited interest rates to 36 percent of those categories of Minnesotans.
Republicans said the state should not tell Minnesotans where they can take out loans.
Rep. Sarah Anderson, R-Plymouth, said that enacting a law like the Atkins measure would send people to neighboring states, the Internet or loan sharks, which already charge higher interest than Minnesota payday loan companies. She said Minnesotans also would not have state protection under those circumstances.
“We are not stopping their behavior,” Anderson said. “All you are doing is pushing them to a place where they have no protection.”
Anderson said Minnesotans may file payday loan complaints with the state Commerce Department, but no one has done that.
Payday loans usually are taken by people who obtain money by promising to repay with their next paycheck. The bill’s supporters say, however, that often loans are repaid by new loans.
Besides limiting most customers to four payday loans a year, the Atkins bill would require lenders to conduct credit history checks and limit the costs they may charge.
Atkins said annual interest costs can mount into several hundred percent because each loan is due to be paid “over a relatively brief period of time” and most customers take out several such loans.
He said that as far as he knows, all Minnesota payday lenders are meeting state law. He said the law is at fault for allowing such high rates.
That Atkins bill limits the number of loans allowed but, other than some special circumstances, does not limit interest rates. He said that cutting the number of loans would reduce the amount of interest paid.