Blog: My city doesn't have any payday lenders. Why should we cap the interest rate?

By Meghan Olsen Biebighauser, MFL

As leaders in more cities are considering rate cap ordinances, this is a question we hear a lot. It’s a good one, and we definitely have thoughts. Here are some of the reasons why your city should implement a rate cap, even if there currently aren’t any payday lenders in your city.

First, just because they aren’t there now, doesn’t mean they won’t move in tomorrow. Over the last decade in Minnesota we’ve seen major geographical shifting in payday loan storefronts. Many lenders have moved out of the urban centers and have established themselves in the suburbs and some of greater Minnesota’s most active storefronts are opening multiple locations. Without a city-level licensure requirement, these lenders are bound only to the state licensure requirements, which currently allow for triple-digit interest rates. Rather than scrambling when you’ve got a new business in town, quickly draining wealth from your neighbors, it is better to act now to protect your community from predatory lenders.

Second, you’re not targeting anyone in particular. By passing a preventative rate cap ordinance now, before there’s a payday lender in operation, you have the advantage of not taking on an active business in your community. You won’t be accused of trying to “shut down” a business or of targeting small or family-owned businesses, because it’s simply theoretical at this point. You’re coming together as a community to establish shared values around consumer protection. Businesses who abide by the (very reasonable 36%) rate cap will be welcomed with open arms!  
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Third, you’ll be a part of moving this forward for all of Minnesota. This issue has consistently been blocked at our state’s legislature. At the Capitol, we’re up against a team of lobbyists, and political donations that stack the cards against us--this isn’t the case in our local communities. As more and more cities pass rate caps with bipartisan support, the pressure for our legislators to act on this for the sake of all Minnesotans will become impossible to ignore. Our coalition understands that piecing payday lending reform together city by city isn’t the ultimate solution to the issue, but we believe that it’s the strategy that will lead to legislative success. And with 79% of our fellow Minnesotans with us, we feel great about what we can do together in our local communities. 

Want to talk more about steps that your local community can take to curb predatory payday lending?  Get in touch!

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Written by Meghan Olsen Biebighauser