Moorhead cracks down on payday lending

Payday Loans
A payday loans store in Springfield, Ill., is open for business in this file photo from 2006. City officials in Moorhead say a new ordinance regulating pay day lenders is the first of its kind in Minnesota.
Seth Perlman | AP 2006

City officials in Moorhead, Minn., say a new ordinance regulating pay day lenders is the first of its kind in Minnesota and among the first in the nation.

a woman poses for a portrait
Moorhead City Council member Heidi Durand.
Courtesy City of Moorhead

Moorhead City Council member Heidi Durand has been immersed in the issue of payday loans for a couple of years after she learned local residents were spending hundreds of thousands of dollars a year on short term high interest loans.

"I heard horror stories I heard personal experiences from people, and it was really deplorable to me, it really made me sick," she said.

Durand worked with other city leaders and city staff to develop what she calls a unique approach, using licensing requirements to restrict payday loans. She said many states, including North Dakota, restrict payday lending more than Minnesota, and some of the regulations implemented by other states helped shape the new Moorhead ordinance.

"No more than two loans of $1,000 or less per person per calendar year. No more than 33 percent interest, a minimum payback of 60 days. That is to get people out of the payday loan trap,” said Durand. In addition to those key regulations lenders must follow to be licensed in the city, they must also provide an itemized list of all fees and charges to customers and provide data about loans to the city on an annual basis.

“I’m shutting down on January 1st,” said Vello Laid, part owner of Greenbacks, a Moorhead payday loan operation he said has been in business for 20 years.

Laid said the new ordinance makes it nearly impossible to run his business.

He argues payday lenders are an “emergency service like an ambulance” and should be allowed to charge higher rates because they lend to people traditional lenders consider too risky for a loan.

Durand championed the restrictions. She said the next step is developing low cost alternative lending options.

"Working with our churches working with nonprofits, working with community action partners, to make sure that lending is done ethically and morally and that people aren't being taken advantage of," she said.

The Minneapolis Area Synod of the Evangelical Lutheran Church in America is actively pushing what it’s calling the “Moorhead model” to other Minnesota cities.

“Minnesota’s cities are ready to take up the mantle if the state Legislature does not work to protect the state’s citizens from predatory lenders,“ said Meghan Olsen Biebighauser, an organizer for the Minneapolis Area Synod and the coalition Minnesotans for Fair Lending.

Durand said officials in Duluth and Mankato, Minn., have inquired about the regulation and while her city council term is ending, she plans to actively pitch the payday loan regulation idea to other cities in the new year.

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