In the last days of the 2014 legislative session, the Minnesota Legislature tried to pass tougher legislation against payday lenders. Several religious groups whose members were being decimated by triple-digit interest against future paychecks were stymied when Republicans blocked the measure, arguing it removes options for low-income families.
It’s an option for getting ripped-off as PBS NewsHour proved yet again last evening with a focus on a Sioux Falls, S.D., family living paycheck to paycheck.
It could happen to anyone. T.J. McLaughlin was making ends meet until he got sick. He missed a week of work, his employer docked his pay, so he got $1,200 from a payday lender.
In exchange, he agreed to pay about $325 a month for a year. That’s a 300 percent interest rate.
Then his illness got worse and his employer fired him. And the debt got worse.
He lost his leg to the illness. And, last weekend, he lost his car to the lender.
Like Minnesota, efforts to legislate against the “debt trap” couldn’t get traction. South Dakota has attracted big banks by eliminating caps on interest rates, a legislator says. “The purpose was to bring in 400 jobs, not bring in 400 percent interest rates,” he says.
Next November, South Dakota voters will decide whether to limit the payday loans.
Currently in Minnesota, for loans between $350 and $1,000, payday lenders cannot charge more than 33 percent annual interest plus a $25 fee.
Archive: MN Supreme Court: Payday loan limits constitutional (NewsCut)