An internet-based payday loan company has agreed to stop lending in Minnesota and pay $760,000 in damages for charging Minnesotans unlawful interest rates of up to 1,564 percent.
Minnesota Attorney General Lori Swanson announced the settlement with Sure Advance, LLC of Delaware on Wednesday. The $760,000 has been deposited into a consumer restitution fund, and the proceeds will be used to refund Minnesota consumers for unlawful interest charges and fees.
Sure Advance made loans to over 1,200 Minnesota residents. The attorney general filed a lawsuit against the company – and four other lenders – in September of 2011, after receiving a growing number of consumer complaints.
Some consumers reported getting phony debt collection calls from international criminal fraud rings after entering their private data into the website of an online lender. The criminal callers falsely tell consumers that they owe money on a loan and will be arrested or go to jail if they don't immediately pay it back.
"Unlicensed internet lenders charge astronomical interest rates, and many consumers who have applied for loans on the internet have seen their private information end up in the hands of international criminal fraud rings," Swanson said. "People should not take out loans from unlicensed internet lenders, period."
A payday loan is a short-term, high-interest loan, often under $500, targeted at borrowers who need money between paychecks. The high-interest rates, recurring finance charges, and refinancing of the loans can cause the amount owed on the loan to increase rapidly in a very short time.
In 2011, the internet loan industry reported loan volume estimated at $13 billion to millions of customers nationwide.
Internet payday lenders that lend money to Minnesota borrowers must comply with state laws, even if their physical headquarters are in another state. Under Minnesota law, for loans between $350 and $1,000, payday lenders cannot charge more than 33 percent annual interest plus a $25 administrative fee. For loans less than $350, Minnesota law caps the fees that may be charged on a sliding scale as follows: $5.50 for loans up to $50; 10 percent of the loan amount plus a $5 fee on loans between $50 and $100; 7 percent of the loan amount (minimum of $10) plus a $5 fee on loans between $100 and $250; and 6 percent of the loan amount (minimum of $17.50) plus a $5 fee on loans between $250 and $350.
THE DO'S AND DON'TS OF PAYDAY LOANS
Never do business with an Internet payday lender that is not licensed to operate in Minnesota. To find out if a lender is licensed, check the Minnesota Department of Commerce website at http://mn.gov/commerce/consumers/Tools/License-LookUp.jsp, or call the agency at (651) 296-4026.
Check if an Internet lender is complying with state interest rate caps.
Do not provide your personal and banking information to an online lender unless you are confident in whom you are dealing. Many consumers report being targeted by international criminal fraud rings after entering their personal information into the website of an online lender. If you are targeted with a phony collection scam threatening to arrest you or have you jailed if you do not pay back an amount you do not owe, hang up the phone.
Consumers may report problems with an unlicensed Internet lender to the Minnesota Attorney General's Office by calling (651) 296-3353 or (800) 657-3787.