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As a member of the Minnesotans for Fair Lending group, I was made aware of the interest rates that payday loan companies charge their customers up to 203% APR. Incredibly high financing costs lead to repeated borrowing – on average, customers are stuck in 10 loans a year.

This is how lenders set up the debt trap. First, the industry does not perform underwriting to measure a customer’s ability to repay a loan; They only ask for proof of income and do not ask about debts or expenses. Second, the industry has no limit on the number of loans or the length of time it can keep people in debt at triple-digit APRs of up to 203%.

That exorbitant interest rate could be overlooked when borrowers take out a loan, get out of debt, and walk out happy. But that’s not the reality surrounding this predatory lending product.

Data from the Minnesota Department of Commerce shows that the typical payday loan borrower takes out 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, Minnesota have effective regulations limiting predatory payday lending. These states have never allowed payday loans, or they have come to effectively ban them – the state of Georgia even saw fit to make payday loans 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 strongly oppose these outrageous practices that exploit people’s financial problems for profit. This year, a group called Minnesotans for Fair Lending is campaigning at the state capitol and in cities across the state for fundamental reform of the payday lending industry: a 36% interest rate cap.

Our legislators should implement fair lending rules that can tame this predatory product into what the industry claims it is—helpful access to small-scale emergency credit—without falling into the trap. We also expect our City Council to take this seriously and stop saying anything in our community.

Our inaction continues to place stumbling blocks in the lives of those struggling with their finances. Rather, we must remove the stumbling blocks and help these people experience hope. Turning a blind eye to it does the opposite of what is needed.

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

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