Get Out of Debt Guy - Steve Rhode

Minnesota Sues Payday Lenders

1-844-335-1967

This past week, Minnesota Attorney General Lori Swanson filed separate lawsuits against five Internet lenders that made loans to cash-strapped Minnesota borrowers that were marketed as providing “cash between paydays,” but that contained unlawfully high annual interest rates of up to 782% percent and that were often illegally extended from paycheck to paycheck, trapping the borrower in a cycle of expensive debt. The Attorney General warned Minnesotans against taking out loans over the Internet from unlicensed lenders, citing a growing list of complaints to her office from consumers who have done business with such companies.

“Many people are living paycheck to paycheck right now, and unlicensed Internet lenders offer easy credit. This credit comes with a hefty price tag and often leaves a rash of problems in its wake,” said Attorney General Swanson.

The Internet payday loan industry is estimated to have a total loan volume of $10.8 billion in 2010. Attorney General Swanson said that, in recent months, consumers who have taken out or even just explored the option of short term loans from unlicensed Internet companies have experienced the following types of problems:

The five companies against which the lawsuits were filed are:

The lawsuits allege that the loans have high rates of interest and other finance charges that violate Minnesota law, making it difficult for consumers to pay down the principal. The lawsuits allege that the companies sometimes unlawfully “extend” or “refinance” the payday loans far beyond the consumer’s next payday, trapping the consumer into high interest payments over an extended period of time. The lawsuits also allege that the companies violated Minnesota law by making loans to Minnesotans without being properly licensed by the Minnesota Department of Commerce. The companies sued each charged interest rates of about 782 percent on a two week loan. The interest spirals when the loan is not paid back in two weeks.

Under Minnesota law, for loans less than $350, Minnesota law caps the fees that may be charged on a sliding scale as follows: $5.50 for loans up to $50; 10 percent plus a $5 fee on loans between $50 and $100; 7 percent (minimum of $10) plus a $5 fee on loans between $100 and $250; and 6 percent (minimum of $17.50) plus $5 fee on loans between $250 and $350. For loans between $350 and $1,000, payday lenders cannot charge more than 33 percent annual interest plus a $25 administrative fee. – Source