The Minnesota Court of Appeals has upheld a judgment against a payday lender that charged Minnesotans exorbitant interest rates as high as 1,369 percent.
Integrity Advance is one of eight payday lenders that Minnesota attorney general Lori Swanson has sued for making loans to Minnesotans without a license. The company had denied it did business in Minnesota, but faced with a number of complaints about the company’s business practices, Ramsey County District Judge Margaret Marrinan ordered the company to pay nearly $8 million in fines and restitution.
The company argued it’s unconstitutional to apply Minnesota laws to loans made to Minnesotans because the company is based in Delaware. Judge Marrinan rejected the argument and today the Court of Appeals did, too.
The ruling today contained this description that shows the desperation of some Minnesota borrowers:
Integrity charged Minnesota borrowers annual interest rates of up to 1,369% on its payday loans. For first time borrowers who borrowed up to $500, Integrity charged $30 every two weeks per $100 borrowed. Under its auto renewal payment plan, which Integrity imposed on borrowers who did not pay off their loans within their first payments, Integrity withdrew this $30 fee every two weeks for a period of eight weeks.
In the tenth week, in addition to the $30 charge, Integrity withdrew $50 from the borrowers’ accounts and applied it to the principal. Every two weeks, Integrity continued to take the accrued interest plus $50, which was applied to principal, from borrowers’ accounts until the loan was paid off. For example, on a $500 loan, these terms resulted in borrowers paying $600 in interest after eight weeks, but the principal balance on the loan.
“Minnesotans submitted applications for payday loans to Integrity from their computers located in Minnesota,” Judge Robert Klaphake wrote in his opinion, rejecting Integrity’s claim that the loans are beyond the reach of Minnesota law.
Integrity then contacted loan applicants at their Minnesota homes shortly after each applicant completed the online application, called applicants at their Minnesota places of employment as part of the loan underwriting process, and contacted applicants’ Minnesota financial institutions to confirm that the applicants’ paychecks were automatically deposited into their bank accounts.
Last year, Integrity was ordered to pay $705,308 to borrowers to reimburse them for the illegal interest rates.
If the company got a loan from itself to pay the restitution, it would owe another $9,655,666 in interest by now.