(The Center Square) – Starting in September, all Minnesota debt collectors must provide debtors a list of Minnesota-based nonprofit organizations that can provide them with credit counseling.
The Minnesota Department of Commerce is implementing laws that legislators passed this spring and Gov. Tim Walz signed in May.
The document debt collectors and agencies must provide is posted on the department’s website in six languages: English, Chinese, Hmong, Somali, Spanish and Vietnamese. The nonprofits help debtors under their rights and responsibilities and work with debtors, creditors and collection agencies to satisfy debts.
Another law passed this spring takes effect in 2024. That law makes changes for “payday loans,” which are small and short-term loans.
The state will place a maximum cap of loan finance charges and fees of 50% annual percentage rate. It will mandate collectors analyze the borrower’s ability to repay the funds for loans that have between 37% and 50% APR. The loan threshold for short-term loans increased from $1,000 to $5,000. All lenders must issue these types of loans under the new laws.
Commerce Commissioner Grace Arnold said the new laws protect residents and the department wants to build a fair marketplace for consumers and businesses.
“Too often, borrowers have been harmed by falling into a debt trap of multiple payday loans each year,” Arnold said.
The department reported that the number of small and short-term loans consumers took out dropped from about 330,000 in 2017 to about 151,000 in 2021 before rising to 160,000 in 2022. The loan amounts have also dropped by nearly half, from $133.6 million in 2017 to $67.9 million in 2022, though they were still lower in 2021, at $62.2 million. The number of consumers with at least one loan was just under 45,000 in 2017 and just under 25,100 in 2022.
Consumers that are having trouble paying bills should request an extension from or negotiate a repayment with the business. Options might include credit cards or loans from a local bank or credit union.
Before using an online lender, Minnesotans should make sure the lender is licensed in-state, here. Unlicensed online lenders exist.