A press release from the office of state Sen. Kevin Dahle, DFL-Northfield, whose district includes Helena Township:

ST. PAUL -- State Rep. Jim Davnie, DFL-Minneapolis, and state Sen. Kevin Dahle, DFL-Northfield, are introducing legislation that would close a loophole that payday lenders have used to overcharge Minnesota borrowers. These three companies found a way to evade the state payday lending law regulating lenders and limiting the fees and interest they can charge borrowers established in 1995.

“These lenders have charged over $6 million in excess fees,” said Davnie. “This is money that should have stayed in borrowers’
pockets and would have helped them achieve financial stability - not be mired in debt.”

The lenders who are the target of the legislation have skirted the rules since 2003. They were able to cheat the system by re-titling themselves as “industrial loan and thrift institutions.”

Industrial loan organizations are not governed by the payday lending law. Every other company who carries this classification is concentrated in the housing market and they don’t offer payday services whatsoever.

“There is simply no justification for allowing a few payday lenders to misuse a label that was never intended to govern this type of lending,” said Dahle. “Those who have used this loophole should not be allowed to continue fleecing the public.”

The bill prevents industrial loan and thrift licensees from making payday loans. It also requires anyone who makes a payday loan to follow the payday lending law and lend at the rates established for this type of loan.

Since this loophole was first discovered in 2003, the three lenders have made over 552,000 unfair loans. They have been charging up to three times the accepted rate for a payday loan.

“If it walks like a payday loan, it is a payday loan. We should treat it as such and close the loophole. In a time of recession, we shouldn’t let Minnesotans get taken advantage of,” said Davnie.

The bill was scheduled to be introduced yesterday in the House and Senate.