Minnesota House of Representatives
Public Information Services

Menu

Public Information Services Menu

Reining in short-term lenders

By Sonja Hegman
Rep. Joe Atkins, right, sponsor of a bill to regulate payday lending, listens as Stuart Tapper, vice president of UnLoan Corp., testifies against HF2293 during a House Commerce and Consumer Protection Finance and Policy Committee hearing Feb. 26. Photo by Paul Battaglia

Short-term lenders in Minnesota may have to look at a borrower’s ability to repay a loan and cap the number of loans a person can take per year.

The House Commerce and Consumer Protection Finance and Policy Committee on Wednesday heard HF2293, sponsored by Rep. Joe Atkins (DFL-Inver Grove Heights). It would require short-term lenders to determine and document whether a potential borrower has the ability to repay a loan, limit a borrower’s debt-to-income ratio to 41 percent, and cap the number of short-term loans at four per year.

The bill passed on a 12-7 roll-call vote and now moves to the House floor. There is no Senate companion.

Atkins asked committee members to think about the highest interest rate they’d ever gotten on a loan. Numbers of 12 percent and 18 percent were mentioned by members.

“What we’re talking about here are rates in excess of 391 percent,” he said. “Those who take out payday loans should not be treated like second-class citizens.”

Atkins added that when a payday lending bill came through the House a few years ago, he voted for it because it was intended for these loans to be for emergency use and it appeared that the lender took all the risk because of high default rates. Currently, the default rate on short-term loans in Minnesota is 2 percent. However, there are exceptions.

Renee Bergeron from Duluth took out a payday loan in 2005 to afford Christmas presents for her children. She didn’t realize how high her interest rate was, and subsequently took out multiple loans, rolling her current loans together. At one point, she said she was paying $600 in interest per month for her short-term loans.

“I ended up in a shelter because I couldn’t pay my rent,” she said. “I’m now in transitional housing, but this happened in 2005. If I’d had other options, I never would have done it.” 

Stuart Tapper, vice president of short-term lender UnLoan Corp., said that the bill would kill short-term lending in Minnesota, and added that borrowers cannot take out multiple loans at one time from regulated lenders. They must repay an outstanding loan before they are allowed to take out another.

“If people are rolling their loans, they are obviously using unregulated sources,” he said.

For example, Internet companies or loan sharks would be unregulated. Tapper also added that capping the number of loans per year at four was an arbitrary number.

Atkins said that the average number of loans short-term borrowers take per year is 10 and an UnLoan Corp. borrower averages 16 per year.

“There are emergencies that arise,” Atkins said. “But how many times? “

Search Session Daily

Recent Dailies

Online tax filing? Study would examine the easier option

If death and taxes are the only guarantees in life, Rep. Cheryl Youakim (DFL-Hopkins) hopes a $17...

Proposed teacher licensure changes create optimism, concerns

Minnesota’s teacher licensure system has been described as confusing and complex. Sponsored b...

Reduced-cost teaching credit program proposed for teachers

While the state struggles with a teacher shortage, lawmakers are looking to make sure the teacher...

Republicans propose redirecting General Fund revenues to roads, bridges

House Republicans have renewed their push to increase state funding for road and bridge projects ...

Nonpartisan office proposed to estimate bill costs

Think of HF599 as the Legislature’s “fiscal note to self” bill. Fiscal notes are estimates of...

Abuse of prescription painkillers called ‘full-scale crisis’

Cindy Woldstad suffered from an opioid addiction for more than seven years after her doctors bega...

Fireworks expansion bill blasts forward to next committee

Steve Haines co-owns Bear Creek Pyrotechnics in Hinckley, a small business that specializes in fi...

Point-of-sale skimming sanctions approved by public safety committee

When at a gas station in his district, Rep. Bob Loonan (R-Shakopee) noticed another park their ve...

Keeping meds out of waterways, away from others prompts call for safe disposal

Residents of many counties are able to safely rid themselves of medication they no longer need. R...

Stink over farm odors has some doing more than plugging their nose

The House Agriculture Policy Committee learned Tuesday the best way to measure farm odor is not w...

Public Information Services  ·   175 State Office Building, Saint Paul, MN 55155   ·   Public.Information@house.mn