SAINT PAUL, Minn. (Legal Newsline) - Minnesota Attorney General Lori Swanson filed separate lawsuits on Tuesday against five Internet lenders that made loans to Minnesota borrowers that allegedly contained unlawfully high annual interest rates of up to 782 percent.
The loans, which were marketed as providing "cash between paydays," were allegedly often illegally extended from paycheck to paycheck, trapping borrowers in a cycle of expensive debt. The five companies named in the lawsuits are Utah-based Flobridge Group LLC, Delaware-based Integrity Advance, Delaware-based Silver Leaf Management, Delaware-based Sure Advance LLC and Utah-based Upfront Payday.
"Many people are living paycheck to paycheck right now, and unlicensed Internet lenders offer easy credit," Swanson said. "This credit comes with a hefty price tag and often leaves a rash of problems in its wake."
Swanson alleges that Flobridge Group LLC touted its loans as "cash flow 'til payday" and "a little emergency money... to get you to your next payday." Integrity Advance allegedly advertised its loans as a way "to get a cash advance until your next paycheck" and that its loans are "designed as a short term cash flow solution." Silver Leaf Management of Utah allegedly stated that its loans "provide you with emergency cash," and Sure Advance LLC allegedly represented that its payday loans "are not intended to meet long term financial needs." Upfront Payday of Utah allegedly stated that online payday loans offer "cash when you need it most...usually between paydays!"
The lawsuits allege that the loans carry high rates of interest and other finance charges that violate state law, making it difficult for consumers to pay down the principal. The lawsuits allege that the companies violated state law by making loans to Minnesotans without being properly licensed by the Minnesota Department of Commerce and that the companies sometimes unlawfully "refinance" or "extend" the payday loans far beyond the consumer's next payday, trapping the consumer into high interest payments over an extended period of time.
The companies each allegedly charged interest rates of approximately 782 percent on a two week loan. The interest allegedly spirals when the loan is not paid back in two weeks.
Swanson said that in recent months, consumers who have taken out or even just explored the option of short term loans from unlicensed Internet companies have experienced phony collection scams, unlawful debt collection tactics, unauthorized withdrawals, auto-extensions and high interest rates.
Under Minnesota law, for loans of less than $350, fees that may be charged on a sliding scale are capped at $5.50 for loans up to $50, 10 percent plus a $5 fee on loans between $50 and $100, seven percent plus a $5 fee on loans between $100 and $250 and six percent plus a $5 fee on loans between $250 and $350. For loans between $350 and $1,000, payday lenders cannot charge over a 33 percent annual interest plus a $25 administrative fee.