Minnesota nonprofit provides payday loan relief

Inside Subprime: June 12, 2018

By Lindsay Frankel

A statewide nonprofit organization is helping Minnesota residents pay back their payday loans interest-free.

If a payday borrower meets their criteria, Exodus Lending will pay off their entire payday loan balance, and give them 12 months to repay with zero interest or fees. The organization has also partnered with churches and other nonprofits to develop programs to keep Minnesota residents out of debt in the first place. Local bank leaders have already agreed to invest in these programs.

Clay County has the highest instance of payday loans in Minnesota, and this is partly due to its location. While payday lenders in North Dakota must put borrowers on a registry to ensure they do not take out multiple loans, crossing the border allows these borrowers to take out new loans. But this only perpetuates a borrower’s financial struggles. “Then they get a third loan to pay off the second loan, and just gets them wrapped up in the cycle of debt,” said Sara Nelson-Pallmeyer, executive director at Exodus.

Payday loans in Minnesota cost borrowers an average of 252 percent annually, but payday loans in North Dakota carry even higher interest rates at an average of 530 percent annually. Unfortunately, this information isn’t readily available to borrowers. Michelle Rydz, Executive Director of the High Plains Fair Housing Center, investigated payday lenders’ treatment of borrowers by visiting a local payday lender incognito. “There was no information they could hand me,” Rydz said. “They just said, ‘Look, you can just get $500, pay it back in two weeks.’ No brochure, no pamphlets, no information.”

Without the right information, borrowers are likely to view payday loans as quick-fix solutions to their financial problems, because that’s how lenders market these products. In reality, payday loans have caused financial harm to many low-income families in Minnesota. The average payday loan borrower in Minnesota earns an average of $30,000 per year, making it a stretch to cover basic expenses, let alone afford the high interest rates and fees associated with these risky loans. Payday loans also disproportionately affect minorities. When compared with all Minnesotans, African-Americans were twice as likely to reside within 2.5 miles of a payday lender, according to Pew.

Exodus Lending was established in 2016, and since then the organization has helped more than 160 people get out of debt. Other non-profits, such as Neighbors Lending, work with families who are struggling financially before they turn to payday loans.

Those in need of financial assistance should seek alternatives before taking out a payday loan. At the very least, borrowers should be well-informed of the risks associated with using these products. If you are a Minnesota resident struggling to get out of debt, you can reach out to Exodus Lending at (612) 615-0067.

To learn more about payday lending in the United States, check out these related pages and articles from OppLoans:


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