Minnesota AG sues payday lenders
Lori Swanson (D)
ST. PAUL, Minn. (Legal Newsline)-- Minnesota Attorney General Lori Swanson filed three separate lawsuits Thursday against payday lenders that made short-term loans over the Internet.
The attorney general alleges that the companies charged consumers in her state a higher rate of interest than is allowed under Minnesota law. The firms also failed to comply with state licensing rules and consumer protections, she said.
Swanson is suing Eastside Lenders LLC of Delaware, Global Payday Loan LLC of Utah and Jelly Roll Financial LLC of Utah. The lenders, she said, charged borrowers $30 in interest for a $100 two-week loan, which amounts to a 782 percent annual interest rate.
The attorney general's office said Eastside's Web site offers loan repayment periods as short as eight days, providing for the annualized interest rate on a $100 loan at 1,368 percent, while Global Payday offers loan repayment periods as short as four days, providing for the annualized interest rate on a $100 loan at 2,737 percent.
"Many people are in a tight spot financially and looking for help, but Internet payday lenders that purposefully evade state laws can make a tough financial situation even worse," Swanson said. "People who take out payday loans from unregulated Internet lenders hope to borrow a small amount of money that they'll repay soon. But the high interest rates, recurring finance charges, and other traps can cause the amount of the loan to explode until it becomes unmanageable."
Minnesota law says online payday lenders that lend money to Minnesota borrowers are subject to the requirements of Minnesota law even if the lender is physically located in another state.
Minnesota payday lending laws restrict the amount of interest and fees that can be charged, a statement from Swanson's office said.
For loans less than $350, Minnesota law caps the fees that may be charged on a sliding scale as follows: $5.50 for loans up to $50; 10 percent plus a $5 fee on loans between $50 and $100; 7 percent (minimum of $10) plus a $5 fee on loans between $100 and $250; and 6 percent (minimum of $17.50) plus $5 fee on loans between $250 and $350. For loans between $350 and $1,000, payday lenders cannot charge more than 33 percent annual interest plus a $25 administrative fee.