Attorney General Lori Swanson on Tuesday filed lawsuits against five Internet payday lenders, accusing them of charging extremely high interest rates and using other tactics to trap customers in a cycle of debt.
Swanson said the lenders, all based in Delaware or Utah, took advantage of Minnesotans who were especially vulnerable during the recession.
"As we continue to go through this tough economy where people are living paycheck to paycheck, they're looking for money to tide them over, maybe to fix a car or pay for some groceries to get them by, pay for utilities, things like that," Swanson said.
The lawsuits were filed against Flobridge Group LLC of Utah, Integrity Advance of Delaware, Silver Leaf Management of Utah, Sure Advance LLC of Delaware and Upfront Payday of Utah.
Swanson said some the companies charged interest of up to 782 percent and extended loans from paycheck to paycheck automatically. Both practices are illegal in Minnesota.
"We have caps on the interest rates that apply, we have laws that prohibit companies from extending the loans or doing serial refinancing of the loans, and some of these companies are violating those laws," she said. "What we seek to do is to prevent the companies from doing business here without proper licensure and then to recoup money for customers who were charged unlawfully high rates of interest."
Swanson said anyone thinking about doing business with an Internet payday lender should check with the Department of Commerce to see if it's licensed to operate in Minnesota.
She also advised consumers to check if the lender is complying with interest rate caps and to be wary in general about unknown Internet companies that ask for private information such as bank account numbers.