$50 - $100 = 10% + $5;
$100 - $250 = 7% (min $10) + $5;
$250 - $350 =6% (min $17.5) + $5
Payday lending is legal in Minnesota.
Minnesota has a $350 limit on payday loans offered in the state. The maximum loan term is 30 days. The finance charges vary with regard to the loan amount advanced ($5.5 for loans up to $50; 10% + $5 for loans from $50 to $100; 7% (min $10) + $5 for loans from $100 to $250; 6% (min $17.5) + $5 for loans from $250 to $350. Real APR is 200%*. Rollovers are not allowed. Criminal actions against borrowers are prohibited.
Minnesota enacted its payday loan legislation in 1995. Those laws have stayed more or less the same since that time. The industry is alive and flourishes (it especially did in the past decade) as there are basically 2 types of payday loan licenses, the loophole that allows lenders to get around many restrictions. And it looks like the product hasn’t lost its appeal: “Minnesota residents took out about 330,000 payday loans last year, borrowing around $133 million,” AP News reported in 2018.
Minnesota Payday Lending Statutes
The operation of payday lending businesses is regulated by state law – Minn. Stat. § 47.60 et seq. All lenders willing to operate in the state must comply with the existing regulations.
According to the existing legislation, payday loans are officially called “consumer small loans” and “consumer short-term loans”. In fact, these are two different loan products that are regulated by different laws.
- Minnesota Statutes Section 47.60 (as of 1995) regulates consumer small loans up to $350.
- Minnesota Statutes Section 47.601 (as of 2009) regulates consumer short-term loans up to $1,000.
As a matter of fact, both are some form of a
All lenders operating in the state should have a license from the Minnesota Commerce Department. There are 3 types of licenses that the Department issues:
- consumer small loan loans,
- industrial loan and thrift,
- and regulated lenders.
Payday loans are offered under the first two. Currently, there are 115 licensed lenders in total, and there are 32 licensed consumer small loan lenders that offer loans up to $350.
Also, according to the state law, payday lenders issuing loans to Minnesota residents do not need to have a physical location in Minnesota, yet, they are supposed to be licensed (Minnesota Statute 47.60).
All licensed lenders and their licenses can be accessed here.
Chapter 47.60 of the existing legislation contains all the laws passed in this sphere. Regulatory limitations are not welcome with some lenders and even with some consumers, however, it is done for the best and all the lending institutions are obliged to comply with the existing law if they want to continue their activity in the state.
Loan Amount in Minnesota
- Lenders are prohibited to grant loans exceeding the amount of $350.
- Borrowers are allowed to take as many loans as they need, there are no limitations here.
Rates, fees and other charges in Minnesota
- There is a particular distinction in interest rate cap in regards to the amount of a loan.
- In case a borrower takes a loan up to $50, he is charged $5.50; for loans from $50 to $100 the fee is $5 with a 10% interest rate; for loans from $100 to $250 the charge amounts to 7% of the borrowed amount and a fee is $5; finally, for greater loans from $250 to $350 the fee is the same – $5 and the interest is 6%, which amounts to $17.50 APR minimum.
Real APR for payday loans in Minnesota can reach 200% (*According to the Center for Responsible Lending 2019: “Typical APR based on
Maximum term for a payday in Minnesota
- According to the
Minnesotalegislation, payday loans in the state are allowed for a period of no more than 30 days.
- However, rollovers or any extensions are not allowed and it is forbidden to take out a loan from a different lender in order to repay the previous debt.
- Only one NSF fee is allowed per loan.
- Any criminal actions against default payments are prohibited.
More information about payday loans in Minnesota can be found on the official website of the Minnesota Department of Commerce.
The History of Payday Loans in Minnesota
- 1939 – Minnesota passed the Small Loan Act. By doing so, it put a start to licensed lending in the state and gave way to loans up to $300 (under 3% monthly interest.)
- 1995 – Minnesota passed Stat. § 47.60 et seq. (the Consumer Small Loan Lender Act) and payday lending became legal in the state. It capped the loan amount at $350.
- 2006 – The Military Lending Act effectively capped payday loans offered to the military at 36% APR. This federal law has no exceptions, thus, no lender in Minnesota is now allowed to offer loans to the military in excess of 36% APR.
- 1999 – 2012 – The tricky thing about Minnesota law is that a payday lender can apply for an industrial loan and thrift company license (under Chapter 53 of Stat. § 47.60 et seq.) By doing so, lenders can offer loans in excess of $350 and sell open-ended loans, get around roll-over restrictions and other terms and requirements. Many lenders followed this route, and thus, there is no surprise that payday lending became a huge industry in the state and managed to collect as much as $12 million in fees (in the above mentioned period).
- 2014 – A bill that would have capped the number of loans borrowers can take didn’t pass.
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (expected in November 2020).
- Present days – There have been many attempts on the part of payday lenders to get around the law in Minnesota, however, many of these attempts have been successfully opposed by the Minnesota Attorney General Lori Swanson. Currently, no new regulations are expected in the nearest future.
(As of May 2019)