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Minnesota may be on the verge of revising a previously implemented law that would clarify a loophole that has allowed payday lenders to avoid rate caps on their loans since 2003.
State Representative Jim Davnie of Minneapolis and Senator Kevin Dahle of Northfield have introduced new state legislation that would prevent "industrial loan and thrift institutions" from offering payday loans. The institutions would also have existing rate caps that had previously been created for payday lenders imposed on them as well.
The change in legislation comes after payday lenders in the state who had laws capping the rates they could charge instituted in 2003 began rebranding themselves as "industrial loan and thrift institutions" – which were not covered under the new laws – in order to skirt the laws and continue charging excessive rates.
Utilizing the loophole, payday lenders in the state have been able to charge $6 million in excessive fees through more than 552,000 unfair loans.
"There is simply no justification for allowing a few payday lenders to misuse a label that was never intended to govern this type of lending," said Dahle.
Davnie added that any type of payday loan should be treated as such and limited under the same state regulations in order to protect state consumers who already may be in financial duress.
"We should treat it as such and close the loophole. In a time of recession, we shouldn’t let Minnesotans get taken advantage of," he said.
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