Moorhead Order Stops Payday Lenders From Charging High Interest Rates
The ordinance will come into effect on Friday
MOORHEAD, Minnesota – Moorhead is hoping to pave the way for frustrated Minnesota cities with a new ordinance to limit payday lenders.
They call it the Moorhead model. It is the first of its kind in Minnesota. This will prevent payday lenders from charging large annual fees.
“Unfortunately, when your business model is based on charging three hundred, four hundred or five hundred dollars in interest rates to financially vulnerable people, that’s a dangerous business model,” said Heidi Durand, member of the Moorhead City Council.
Last year, Moorhead payday lenders averaged 200% annual fees. However, some charges went up to 476%. With the ordinance, the city will cap the annual fee that lenders can charge at 33%.
“With the economic uncertainty, with the drying up of unemployment benefits, we felt it was very important to adopt protective measures to ensure the safety of our financially vulnerable friends, neighbors and relatives,” said Durand. .
“It’s about this accountability so that we make sure we don’t take advantage of citizens who may be economically disadvantaged,” said Moorhead Mayor Johnathan Judd.
Lenders will also no longer be able to demand payment on the borrower’s next payday. Instead, they must offer a minimum of 60 days for repayment.
“The time has come, especially now. When time and financial resources are really tight for many families. We should take this time to educate how money works, ”Judd said.
“It’s been too long. It wasn’t soon enough. I had a lot of support from city staff, fellow council members, the human rights commission. They all agreed that it was ‘was something that was not official for our residents and it was very harmful, ”said Durand.
Moorhead has two payday lenders: Peoples Small Loan and Greenbacks. Greenbacks says it will close on Friday.