City testimony was given in support of the bill, which would lower exorbitant fees and interest rates on consumer “payday loans.”
The bill, authored by Rep. Jim Davnie (DFL-Minneapolis), would cap the total amount of interest, finance charges, and fees for consumer short-term and small loans at 36%. This is similar to laws already passed in 17 states and Washington, D.C.
The committee passed the bill on a 10-6 vote and placed it on the House general register, where it awaits action from the full House. There is no Senate companion bill at this time.
Protection for individuals
While only one payday lender testified in opposition to the bill, several organizations testified in support, including nonprofit organization Exodus Lending, as well as two local synods of the Evangelical Lutheran Church of America. They said the measure is a good way to support Minnesotans by prohibiting excessive interest rates that often result in individual financial spiral.
The League of Minnesota Cities provided written testimony consistent with League policy on the payday lending issue, which highlights the need for statewide legislation that protects consumer small loan borrowers.
Protection for local economies
Oakdale City Administrator Chris Volkers also testified in support of the bill. She noted the negative implications that payday lending has on communities — not just for individual borrowers — but also for local economies. Because of excessive costs to the borrower, a city’s local economy loses capital that could be circulated within the community rather than going to outside interests.