ST. PAUL, MINN -- Poll results this month show over 70 percent of Minnesota voters agree that consumer protections for payday loans in Minnesota need to be strengthened. The poll commissioned by Minnesotans for Fair Lending (MFL) was conducted in April by Public Policy Polling.
Minnesotans for Fair Lending, including 34 endorsing organizations representing seniors, social service providers, labor, faith leaders and credit unions, has been advocating for reform of Minnesota’s payday lending laws at the legislature this spring. HF 2293 (Atkins) is expected to be on the House floor for a vote Thursday, April 24. SF 2368 (Hayden) is expected to come up for a floor vote in the Senate before the end of the month.
Payday loans carry triple-digit annual interest rates, are due in full on a borrower’s next payday, require direct access by the payday lender to a borrower’s bank account, and are made with little or no regard for a borrower’s ability to repay the loan. The typical payday loan in Minnesota carries a 273 percent annual percentage rate (APR).
Poll results show 75 percent of voters support changing state law to require payday lenders to ensure that a loan is affordable in light of a borrower’s income and expenses.
“The predatory business model of payday lenders opens a cycle of repeat borrowing with fees,” said Arnie Anderson, executive director of the MN Community Action Partnership. “Community Action agencies throughout the state see clients every day who are caught in the debt trap from payday loans. From the first loan, they were not able to meet monthly expenses so the payday loan with its fees only got them deeper in debt.”
According to Minnesota Department of Commerce data, the typical payday loan borrower takes out ten loans per year. An individual will pay $397.90 in charges for a typical $380 payday loan. In 2012, more than one in five borrowers in Minnesota was stuck in over 15 payday loan transactions.
Nearly 70 percent of voters talked to in the poll support changing Minnesota law to prevent the payday loan cycle from causing a borrower to remain in debt for than 90 days a year.
“In 2012 alone, 84 storefront payday lenders extracted a total of over $11.4 million statewide in fees and charges,” said Tracy Fischman, executive director of AccountAbility Minnesota. “The payday debt cycle is responsible for the majority of these fees. The fees too often prevent Minnesota borrowers from being able to pay their bills on time and pull themselves out of the debt trap. One AccountAbility Minnesota customer trapped in the cycle summed it up this way – it took me a long time to establish good credit and a short time to ruin myself financially.”
Poll officials report that even after hearing the payday lenders’ arguments, the significant majority of voters (63 percent) still support these changes to the state law.
“Our clients report that this debt trap of multiple payday loans leads to even more financial stress and often makes the financial situation worse,” said Cherrish Holland, a Lutheran Social Service financial counselor based in Willmar. “The impact on families can be devastating and we need reforms now.”
Minnesota voters said, by a three to one margin, that they would be more likely to vote for their state legislator who supported the specific reforms assessing a borrower’s ability to repay the loan and limiting the debt period to 90 days in a year.
“Minnesota voters want reform. Payday lenders claim that payday loans are for unexpected emergency expenses, but the reality is that nearly 70 percent of payday borrowers first used payday loans to cover ordinary, expected expenses,” explained Brian Rusche, executive director of the Joint Religious Legislative Coalition. “As such, a triple-digit interest payday loan is not a solution for meeting ongoing bills. It snares the borrower in a long-term debt trap.”
The poll was conducted by Public Policy Polling and included 530 Minnesota voters, with a margin of error of +/- 4.3 %.