A bill that would cap payday-loan rates is unlikely to make it to Gov. Tim Walz's desk this spring.
Sen. Gary Dahms, the Republican from Redwood Falls who chairs the Senate Commerce committee, is unlikely to let the reform bill out of committee for a full Senate vote.
"There are plenty of reasons Minnesotans might need access to safe and affordable short-term loans, such as unexpected expenses, bills due before payday or a quick infusion of cash to avoid overdraft fees," Dahms said through a spokeswoman. "Payday lenders provide that cash quickly. I have no interest in destroying that market and forcing Minnesotans into the arms of illegal loan sharks."
Some people say it's the payday lenders who are the sharks.
Those critics support a 36% cap on rates those lenders can impose. At present, interest and fees can combine to create effective rates above 200%.
Even voters in South Dakota, through a referendum, joined nearly 20 states, plus the District of Columbia, to restrict the terms of firms such as Payday America, Unbank and Ace Cash.
"The business model is to make millions off the working poor," said Bishop Bill Tesch of Moorhead, Minn.,-based Northwest Minnesota synod of the Evangelical Lutheran Church in America (ELCA), comprising 223 Lutheran congregations, as he testified on the legislation to the House Commerce Committee.
"A never-ending cycle of debt in which a loan of several hundred dollars becomes ruinous debt of several thousand," he said. "Our church stands with people on the margin. Our Christian faith … has a strong prohibition against this form of usury and exploitation of the vulnerable."
Over nearly a decade, the payday-reform movement has morphed from studies and anecdotal stories into an organized response.
"Two and a half years ago, I found myself a single mother," Melissa Juliette told legislators in 2019. "I fell behind on my bills, including rent. So the late fees started to mount. I took out a 1/8$480 3/8 payday loan and was expected to pay back $552 in interest and fees. I thought I could pay it back right away. However, the fees and my mounting bills got out of control. I ended up with four payday loans."