This article is one of a series of occasional articles funded by a grant from the Northwest Area Foundation.
Efforts to crack down on payday loans in Minnesota may once again be heading towards “wait until next year” status.
Yes, Minnesota House passed a bill that would place tighter restrictions on transactions that charge the state’s lowest interest rates of more than 250%.
And yes, the governor tried Monday to shed light on business practices that operate in the shadow of decency.
“I urge the Senate to put the bill to a vote and see if lawmakers on both sides are prepared to stand up to protect the interests of the people of Minnesota, rather than the economic interests of payday lenders,” he said. declared the governor of his bully pulpit.
The House bill more strictly limits the repeated activities of payday lenders, with tighter controls on borrowers’ ability to repay.
But even with a weaker Senate bill, Deputy Majority Leader Jeff Hayden is struggling to muster votes.
“It’s bogged down,” said the Minneapolis DFLer. “The industry fights whatever we try to do.
This is one of those puzzling issues. Why is it so difficult to impose stricter restrictions on an industry that seems to have a strong odor? Why does Minnesota continue to protect the business practices of many banned states and the doomed Department of Defense? Why has this issue become partisan, with virtually no Republican backing the industry crackdown?
Or is it really partisan when you look at the campaign contributions?
Booming business, booming pitfalls
A MinnPost series last year emphasized the growth of the industry. Between 2007 and 2011, payday loans in Minnesota increased from 170,000 to 350,000 per year, for a total of nearly $ 100 million. The state’s largest payday loan company, Payday America, pocketed $ 6 million in payday profit in 2011.
In House committee testimony this session, Anna Brelje told her story to explain how the process works – and operates.
She was 24, had a medical crisis (no insurance) and found herself in debt. Even working full time, she couldn’t pay her bills. She borrowed $ 300 as part of a payday loan transaction, couldn’t pay it back in two weeks, so the next payday borrowed again to pay off the first loan.
Senator Jeff Hayden
“I found myself trapped,” she said; over a two-year period, she paid over $ 2,500 in fees.
Out of the trap now thanks to decent work, Brelje has become a leader in the fight against practices. She also involved her church in Minneapolis, Holy Trinity Lutheran.
Several religious organizations have also pushed lawmakers to act.
In some ways, this seems like a classic case of those in greatest need and least influence on Capitol Hill.
Rep Joe Atkins, DFL-Inver Grove Heights and chairman of the trade committee, shakes his head at the situation.
“The people who are caught in these traps are not stupid people,” Atkins said. “These are people who are desperate and struggling to cope. Everyone is protected. ”
But Senator David Hann, Leader of the Senate Minority, sees it differently. Tighter restrictions on payday loan transactions could end up hurting the very people they intend to help.
“I don’t know which side the angels are on in this situation,” Hann said. “From what I understand, people who use these mechanisms to borrow money cannot avail themselves of the traditional means. These are mechanisms that are a means of obtaining a loan. There are people who cannot afford credit elsewhere. There must be accommodation. ”
Rixmann: GOP power, DFL donor
Let’s take the time to address a rumor circulating around the Minnesota payday loan problem:
Brad Rixmann is Founder and CEO of Pawn America, Owner of Payday America. Rixmann is also a major player in Republican Party politics. He’s a big donor. He was honorary chairman of the campaign for governor of Tom Emmer.
This leads to the rumor that Rixmann has a strong influence on the Republican House and Senate caucuses.
Hann says Rixmann’s name was never mentioned during caucus discussions on the payday loan crackdown efforts.
Yet Hann was asked, given that GOP lawmakers often say unions shape DFL policies, isn’t it reasonable to suggest that outside influences shape GOP policies?
“Frankly, when you talk about an individual donor, it doesn’t compare to the size of a union,” Hann replied. “When you talk about a union, you are talking about both the money and the people on the ground. There is no individual contributor that can compare to this. ”
Rep. Tim Sanders, R-Blaine, is a member of the House Trade Committee and an enemy of Bill.
The Rixmann influence? “His name was not mentioned,” Sanders said.
But Republicans don’t control the legislature – Democrats do. They could pass any bill on their own. Why not ?
Well, while we’re on the subject of Rixmann donations, know this:
In 2013, Rixmann donated $ 10,000 to the DFL Senate Caucus, $ 5,000 to the DFL House Caucus, $ 500 to the 52sd DFL Senate District and $ 4,000 to Governor Dayton, according to the Campaign Finance and Public Disclosure Board.
While the funds obviously did not buy Dayton or House support, Senators might have an explanation for their fifth individual contributor of 2013. Rixmann also gave the DFL Senate an additional $ 24,750. $ between 2006 and 2012, according to the CFPDB.
See, Rixmann was more generous with Republican causes. Yet his name is known – if not mentioned during caucus sessions – among DFLers as well as Republicans.
The cap does not mean “the need goes away”
Rixmann was not available for comment. But Chuck Armstrong, chief executive of Rixmann Companies, explained why the company is blocking legislative efforts to cap the number of annual loans a customer can take.
The main part of the House bill would prevent a client from getting more than four loans per year. The weaker Senate version would cap that at eight. The Chamber also demands more stringent credit checks.
Representative Joe Atkins
But the big deal is the caps – payday lenders rely on regular borrowers. And some of those borrowers have testified that they repeatedly relied on payday lenders.
“To top it off, that doesn’t mean the need will just go away,” says Armstrong.
Currently, most of Payday America’s 20,000 customers use the service more than eight times in a year, he said. Payday America, at least, allows customers to take out one loan at a time, he adds.
Armstrong admits that on the surface it’s easy to paint a grim picture of operations like Payday America. But, he said, despite statistics showing people paying more than 200% interest on loans, the majority of Payday America customers pay off their loans within two weeks.
“If you borrow $ 350 and pay it back in two weeks, it will cost you $ 35,” he said. “Our clients are very thoughtful in their decisions. … Our customers love us. ”
(The state Department of Commerce reported that in 2011, Minnesota residents using payday loans paid fees and other costs for loans that amounted to an interest rate of 237 percent. These institutions bypass strict state usury laws because they are licensed as industrial loan and savings operations, not payday lenders. This is called a big loophole. )
During the session, Armstrong said, Payday America customers sent 10,000 emails and letters to lawmakers urging them to oppose the proposed restrictions. On the company’s website, customers are urged to urge lawmakers to block the proposed changes.
The strength of the opposition is that if the legislature passes the proposed restrictions, the licensed lending business could be forced to close. This would mean that the only possibilities for loans would be via the Internet or from loan sharks around the corner.
“The real danger is the Internet,” Armstrong said. “There are predators on the Internet. We are a physical and licensed company. ”
Refuse to stop the “terrible treadmill”
As time goes by, it seems those pushing to stop legislative action hold the stronger hand.
“The point of what we’re trying to do is get people out of this terrible treadmill where they keep borrowing to pay off a previous loan,” Hayden said.
But just to get the Senate version of the bill through the Senate Trade Committee, headed by James Metzen, a former DFLer long known to be friendly with everything associated with the bank, Hayden had to water down his invoice.
“The Senate is just more conservative,” Hayden said.
Will the measure take off? On Monday, several people pushing for legislative action briefly met outside the Senate Chamber with Majority Leader Tom Bakk.
What was said?
“He told us they still don’t have the voices,” said Meghan Olsen Biebighauser, a Holy Trinity organizer who helps lead religious opposition to payday loans.
Someone else in the group said, “Don’t you think he could get the votes if he really wanted them?