Tears flow on both sides of payday loan debate
ST. PAUL — Tears flowed freely Wednesday as senators debated what normally is a rather dry issue: loans.
The Senate commerce committee approved a compromise bill that limits Minnesotans to eight payday loans per year, with at least a 45-day loan-free period.
Renee Bergeron of Duluth told committee members that as a single mother of four, she found herself needing money.
“It is just a bait,” she said of the payday loan she received, and felt she was forced to keep getting loans to pay off previous loans.
“It just started spiraling,” she said in emotional testimony. “When it was all said and done, I was paying at least $600 each paycheck.”
On the other hand, Teri Frye of Blaine, Minn., said she does not make enough as a Target cashier who is raising a teenager, so she turned to short-term loans.
“I know things are different at the Capitol than the real world where life happens,” Frye said, but in the real world people sometimes need financial help. “I don’t have time to come down here to St. Paul and ask you not to take away my financial rights.”
Restricting loans “hurts thousands of people in my position,” she said. “If Payday America is gone, I have no idea what I will do.”
Frye said she borrows $150 at a time and repays Payday America $178. She and others testified that is a fair interest rate considering that banks impose $35 overdraft charges.
However, Cherrish Holland of the Willmar Lutheran Social Services office came down on the other side.
She told of one woman who blamed payday loans on “sinking her credit score and self-esteem to all-time lows.”
Holland said the woman took out a $500 payday loan and paid $80 per paycheck for a year.
Some told the committee that without short-term loans, Minnesotans may turn to unregulated loans from the Internet, other states or other countries. They also could look for loan sharks.
The state already has limited payday loan regulations but does not restrict how many loans Minnesotans may take out in a year.
The committee rejected strong regulations offered by Sen. Jeff Hayden, D-Minneapolis, that would have limited Minnesotans to receiving five short-term loans a year.
Sen. Paul Gazelka, R-Brainerd, offered an amendment allowing 12 loans a year. The committee changed that to eight loans in another amendment by Sen. Roger Reinert, D-Duluth, while also requiring at least 45 days without a short-term loan during the year.
The bill also requires lenders to check to make sure customers have the ability to repay loans.
The measure heads to the full Senate after the committee approved the bill 8-5 in a bipartisan vote. A bill more like the original one from Hayden awaits House action.
“It seems like there is more work to be done,” Reinert said.
Senate Commerce Chairman James Metzen, D-South St. Paul, urged Gazelka, Reinert, Hayden and others to work out a compromise before the Senate vote.
“Both sides make very strong cases,” Gazelka said.
The emotion was obvious in front of a committee that often discusses routine financial measures.
Sherry Rasmusson of Wayzata, Minn., summed up testimony for those who support payday loans: “I just want to thank God for Payday America.”
“Not all loan companies are the same,” she said. “I have been scammed by loan companies,” especially those on the Internet.
Stuart Tapper of Unloan and Unbank, which provides payday loans, said the state should not limit Minnesotans’ options.
“At Unloan, we do not exceed 25 percent of income,” he said of interest rates charged customers. “Our customers know exactly what they are going to be charged.”