In September 2011, Minnesota Attorney General Lori Swanson sued five out-of-state companies for making predatory payday loans; charging higher fees and interest rates than allowed by Minnesota law. These companies operated over the Internet using marketing slogans to lure consumers in tight financial straits.
These two lenders are U.S. Bank and Wells Fargo, which are both federally chartered banks. Banks argue that national bank pre-emption standards permit national banks to override state law in this circumstance. Wells Fargo and U.S. Bank both directly engage in predatory payday lending, charging vulnerable customers annual percentage rates (APRs) of up to 365 percent interest.
A new report released by Minnesotans for a Fair Economy details these predatory lending practices and their effect on consumers in Minnesota:
“Payday lenders don’t consider whether the person can repay a loan before approving it. There are no credit checks. As long as someone has an ID, bank account and source of income, they can get a loan. Payday lenders profit most when consumers are unable to repay their loans.
“Most customers can’t afford to repay the whole loan in just a few weeks, and if the payday lender deposits their check, it will bounce, costing the customer even more in fees. So instead of incurring bounced-check fees, the customer agrees to renew the loan and just pays the interest, or takes out a new loan to pay off the old one, leading to a cycle of debt that can last for months or even years.
“Just 15 percent of payday loan customers take out just one loan, and the average payday loan customer is indebted for more than half the year.”
The full report is available for download by clicking here. If you or someone you know has had a payday lending experience with U.S. Bank or Wells Fargo, we’d like to hear your story. Take a moment and fill out this form.
For more information about payday lending practices, visit the Center for Responsible Lending.