What predatory loan products are out there?
Minnesotans are vulnerable to a host of different predatory lending products offered within their community, state, and country that exploit individuals and impose financial hardships. Tactics include high interest rates and fees, short repayment terms, lack of transparency, loan flipping, and more all of which trap borrowers in cycles of debt. While Minnesota has some restrictions on loans, payday, pawn, auto title, and online installment loans all make an impact on our neighbors.
In 2023, Minnesotans for Fair Lending led the campaign to cap interest rates on small-dollar consumer loans at 36% APR, effectively ending predatory payday lending in Minnesota. However, Online, out-of-state lenders are evading Minnesota law. The ability to do so stems from a provision in the federal Depository Institutions Deregulation and Monetary Control Act (DIDMCA). To learn more about the legislative campaign to close the Rent-A-Bank loophole, check out our fact sheet below.
In Minnesota, a typical payday loan is $365 and carries an APR of 200%, and is re-borrowed an average of nine times in a year.
Payday loans don’t solve financial pressures; they make them worse.
