The Minnesota House has passed a set of new regulations for companies that provide short-term loans at significantly higher interest rates than banks.
The transactions are known as “payday loans.”
The bill, which lawmakers passed by a vote of 73-58, requires lenders to check the credit history of their customers. It also attempts to stop the cycle of borrowers repaying one loan with another, by allowing only four loans per customer within a year.
Rep. Joe Atkins, DFL-Inver Grove Heights, said his bill will help protect low-income Minnesotans from predatory lending.
“The folks that take these loans aren’t second class citizens,” Atkins said. “They’ve just fallen on hard times, is all, and they’re not idiots. They should not be treated like idiots. They shouldn’t be treated like lesser people just because they’ve had a difficult time, and yet that is what Minnesota law allows.”
Republicans criticized the bill for not addressing high interest rates or the problems associated with unregulated online lenders. Rep. Greg Davids, R-Preston, said a limit on the number of loans will force people in financial need to go to online lenders.
“We’re taking away options. We are hurting the poorest of the poor,” Davids said.