Moorhead Advisor Leads Charge to End Payday Loan ‘Vicious Cycle’

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She asked the city’s Human Rights Commission on Wednesday (February 19) to back state legislation that would significantly reduce interest rates or support a possible municipal plan to limit rates.

Durand said that “the working poor or the shortest or the most vulnerable” take millions of dollars in such loans in Clay County, representing hundreds of thousands of dollars in interest payments and fees withdrawn. of the local economy.

Many borrowers, she said, cannot get a loan from another financial institution. On a per capita basis, the county is second among Minnesota’s 24 that have at least one payday lender.

Current state law, for example, allows a two-week loan of $ 380 to cost up to $ 40, or an interest rate of 275%. However, Durand said some are finishing much higher, noting that Minnesota’s three largest payday loan lenders, which account for 75% of those loans, are operating under an industry and savings loophole to avoid that cap. Lenders, she said, “have little or should I say absolutely no consideration for the borrower’s ability to repay the loan.”

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She said many borrowers – those who have taken about 76% of payday loans nationwide – can’t pay off the first loan, so they have to borrow more. So, she said, many are “trapped in a vicious cycle.”

Peoples Small Loan Co. is seen Thursday February 20 in Moorhead.  Michael Vosburg / Forum Photo Editor

Peoples Small Loan Co. is seen Thursday February 20 in Moorhead. Michael Vosburg / Forum Photo Editor

Durand said there were two payday lenders in Moorhead – Greenbacks, 819 30th Ave. S., and Peoples Small Loan Co., 1208 Center Ave.

Greenback chairman Vel Laid said people who have never used the company do not understand it.

“We are in the ambulance business,” he said. “People can have their light bill owed and they need the money right now. They need it immediately. They don’t have time to go to a bank and then wait two to three days for a response. It’s an emergency.

Laid said they are not a bank, but give loans to people who otherwise could not get one.

“It’s a question of supply and demand,” he said, noting that they receive clients from “everywhere” and calling his business a provider of “short-term loans”, not a corporation. payday loan.

Laid said if city or state regulations were approved, the business “would just go underground.” Asked about the higher cost of loans, “we take a lot of high risk,” he said.

A person who answered the phone for Peoples Small Loan Co. said they were operating under restrictions, but said he was “not interested” in an interview.

“Let people down”

In 2018, Clay County reports to the state’s Commerce Department showed that there were 11,305 payday loans underwritten for $ 3 million by 856 borrowers, with 1,600 of the loans stretched into five or more extensions. and 219 extended 20 times or more.

Durand said she doesn’t know how many borrowers might cross North Dakota, where lenders face tighter restrictions, and lenders don’t report borrower demographics.

The average county payday loan was $ 273 and the average annual interest rate was 205%.

A study by Pew Charitable Trusts found that about 70% of borrowers use payday loans for “ordinary expenses”, such as groceries or utility bills, rather than for emergencies, she said. declared.

A Minnesota bill that would have capped interest rates at 36% and closed the industrial and savings loophole failed in the last session. Durand said residents who oppose the practice should write letters or contact state lawmakers.

Moorhead Human Rights Commissioner Heather Keeler told Durand she did not support the previous legislation because she thought 36% was a high cap, but after Durand’s presentation she had a new perspective, adding that the city “may be leaving people with high interest and high fees.

Human Rights Commission chairperson MaKell Pauling-Normandin said she was willing to support state law or even municipal law and would encourage others to offer their support.

Durand said Moorhead City Attorney John Shockley and City Manager Chris Volkers were looking into what the city could possibly do and that they hoped to take the matter to city council.

A municipal plan could eventually cap interest rates, limit re-borrowing, impose longer repayment terms or regulate fees, she said. The city could also work with Moorhead Utilities, she said, who can cut utilities during the warmer months, offer payment plans or find other ways to help more residents. poor to pay their bills.

Shockley said he is still studying the legal issues surrounding any possibility of creating a city law.

Lois nearby

North Dakota and South Dakota have laws to limit interest rates on payday loans. North Dakota limits loans to $ 500, with 60 days to repay, and finance charges and charges capped at 20% with a single loan re-borrowing.

Voters in South Dakota approved a voting measure initiated in 2016 amending payday lending and car title laws with a 36% interest rate cap and just four re-borrowing loans. After the law came into force, most lenders shut down or abruptly left the state, including a large company called Dollar Loan Center in Sioux Falls.

Since then, the National Center for Responsible Lending has said South Dakotas have saved $ 81 million per year in fees that would otherwise have been paid on the loans. The report also states that former South Dakota businesses are still aggressively pursuing debt collection by suing small claims court for loans dating back years after turning borrower terms into massive rate hikes. ‘interest.

As Durand works on the issue, she said there is an option for borrowers who want immediate help. The nonprofit Exodus Lending in St. Paul works statewide, paying off loan debt directly to lenders, and developing a repayment plan for up to 12 months with no fees or interest.

Executive Director Sara Nelson Pallmeyer told The Forum Exodus a successful repayment rate of 90% of the 413 borrowers she has helped since the start of 2015. Last year, the association became a member of the Credit Builders Alliance to help people build or rebuild. credit scores because they can now report payments to major credit bureaus.

She is also leading efforts to get state legislation approved, which she says was passed by the House last year but was not heard in the Senate. She thinks 2021 is probably the time when they’ll start a flare up again as she doesn’t know if that will be considered again in 2020.

To ask for help

Contact Exodus Lending in St. Paul at 612-615-0067 or online at www.exoduslending.org to learn more about the association. Moorhead City Councilor Heidi Durand said people can also contact her for more information at 701-541-2684.

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