Payday lending is often advertised as “emergency relief,” but if you look at the data, there is nothing farther from the truth.
On average, individuals in Minnesota who utilize payday loans take out an average of 10 loans with the equivalent of a 208% interest rate, trapping them in revolving payday debt for an average of five months each year. Payday lending drains the resources of individuals, families and communities.
Blue Earth County is currently the fourth per capita in Minnesota for use of payday loans, and Mankato is the only city in this county with a brick-and-mortar shop.
The average annual interest rate locally is 251%. All of this data is public information sent in from the payday lenders to the Minnesota Department of Commerce annually.
Currently, 18 states and the District of Columbia have restrictions that protect consumers from this predatory practice. In South Dakota, 76% voted in favor of a 36% interest rate cap. Nebraska was the latest state to add restrictions and protect consumers.
Research shows that states have continued support for restrictions on loans years afterwards.
Tired of waiting around for the state to protect consumers, some local communities have taken action. On Jan. 1, the Moorhead Model ordinance began, capping interest rates at 33%, allowing customers up to 60 days to repay their loan and requiring that all lenders give their consumers an itemized list of fees.
Minnesota Council of Churches and the Minnesotans for Fair Lending support a statewide 36% cap on payday loans.
I urge you to speak to your Mankato City Council member about the need to protect the families of our community.