ST. PAUL, Minn. (WCCO) — For struggling families living paycheck-to-paycheck, internet deals offering a short-term payday loan can appear appealing. But for many customers, what was intended to help them out when they are short of cash, can quickly grow into long-term headaches.
According to Minnesota Attorney General Lori Swanson, that was the case for some 1,269 state customers who applied for loans after perusing the internet.
“Only, they became not short-term loans,” she said. “The companies rolled them over and over again, so pretty soon the $500 loan might become $1,400 in interest.”
Beginning in 2010, Swanson’s office started getting complaints from Minnesota customers of internet loans that were charging interest rates as high as 1,369 percent.
Under Minnesota law, consumer loans of this type are limited to no more than 33 percent on short-term payday loans of between $350 and $1,000. Smaller dollar amount loans can charge no more than between 6 percent to 10 percent.
But one of the internet payday lenders, Integrity Advance, even denied knowing that the customers it was signing up were residents of Minnesota. The company is not licensed with the Commerce Commissioner, as required by state law.
“You take one out and tide yourself over and quickly that interest rate can spire out of control, swamping the original loan amount very quickly,” Swanson said.
Integrity Advance was one of eight companies sued by the state in 2011. While the others settled with the state, Integrity Advance challenged the suit in the Appeals Court and lost, sending the case back to the district court. On May 31, Ramsey County District Court Judge Margaret Marrinan ordered the company to pay $705,308 in restitution to customers and another $7,000,000 in combined statutory damages for willfully violating state lending laws.
“We hope the order sends a message to other companies out there to think twice,” Swanson said.
For more information on payday loans and state regulations, click here.