As a member of the group Minnesotans for Fair Lending, I have been made aware of the interest rates payday loan companies are charging their clients an interest rate as high as 203% APR. Impossibly high finance charges lead to repeat borrowing -- on average, customers are trapped into 10 loans per year.

Here’s how lenders set the debt trap. First, the industry does virtually no underwriting to measure a customer’s ability to pay back a loan; they only require proof of income and do not inquire about debt or expenses. Second, the industry has no limit on the number of loans or the amount of time over which they can hold people in triple-digit APR debt, up to 203%.

One could overlook this exorbitant interest rate if borrowers took out one loan, climbed out of debt and walked away satisfied. But that is not the reality surrounding this predatory loan product.

Minnesota Commerce Department data show that the typical payday loan borrower takes an average of 10 loans per year, and is in debt for 20 weeks or more at triple-digit APRs.

Eighteen other states and the District of Columbia, and the city of Moorhead in Minnesota have effective regulations in place to limit predatory payday lending. These states never allowed payday lending, or they have come around to effectively ban it -- the state of Georgia even saw fit to make payday lending a crime. Five other states have careful restrictions on this type of loan. Minnesota should join this group.

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As a leader in the faith community, I vigorously oppose these outrageous practices that exploit people’s financial problems for profit. This year, a group called Minnesotans for Fair Lending is advocating at the state Capitol and in cities around the state for a basic reform to the payday lending industry: a 36% interest rate cap.

Our legislators ought to implement fair lending regulations that can tame this predatory product into what industry claims it to be -- helpful access to emergency small-amount credit -- without the trap. We are also looking to our city council to take this seriously in saying no more in our community.

Our not taking action continues to put stumbling blocks in the lives of those struggling with their finances. Rather we need to be about removing the stumbling blocks helping these people experience hope. Our turning a blind eye to this will do the opposite of what is needed.

Terry Hagensen, Turtle River, is the pastor at New Salem Lutheran Church.

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