Minnesotans better protected from predatory short-term loans in new year
ST. PAUL, Minn. — Minnesotans are now better protected from so-called "predatory" short-term loans.
A law capping short-term interest rates at 36% went into effect on Jan. 1.
Missy Juliette is on the board of Exodus Lending, a St. Paul non-profit that helps people out from under these loans, but she experienced the pitfalls of short-term lending herself in 2016.
When she hit some hard financial times, Juliette borrowed $400 from a short-term lender.
"I thought it would be a one-time fix, a one-time thing, and it was not," Juliette said.
She says there were hefty fees and a whopping 291% interest rate.
Juliette fell behind and took out three more similar loans.
RELATED: Minnesota AG Keith Ellison cracking down on predatory payday loans
"Then you get the letters that say, 'Hey, you're going to go to court and you're going to garnish your wages,'" she said. "It feels really awful. You don't want to tell anybody because you don't want anybody to know."
Juliette was in the all-too-common situation that Minnesota Sen. Judy Seeberger was looking to address when she wrote the bill capping interest rates.
"The average number of payday loans that people would have would be six payday loans," Seeberger said, who's also the vice-chair of the Commerce and Consumer Protection Committee. "Some people had nine or 15. They end up getting really expensive and getting people stuck in a trap they just can't get out of."
Exodus Lending helped Juliette by paying off her loans, then she paid Exodus back with small payments and zero percent interest.
She's thrilled lending rates can no longer be astronomical.
"The 36% interest rate cap was phenomenal," Juliette said. "It feels so good that we've advocated so long for this."
Financial experts say it's vital to read the fine print on short-term loans and understand the fees and rates.
There are also options besides payday lenders, like asking friends or family, and some credit unions now do small-dollar loans.
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