For Immediate Release

SAINT PAUL – With the continuing government shutdown, federal workers who are not receiving paychecks may be looking to short-term loans to help pay their bills. The Minnesota Commerce Department is urging federal workers – and all consumers – to be aware of the risks in borrowing money from unlicensed lenders that advertise and offer short-term, payday or installment loans through the internet.

“We know this is a very difficult time for many federal workers and their families,” said Commerce Commissioner Steve Kelley. “With the need to pay bills and make ends meet, some people may be considering short-term loans. We want to make sure they make the right choice and avoid costly mistakes that could add to their financial stress.”

In particular, borrowers should avoid doing business with unlicensed online lenders, which often charge interest rates and fees that exceed what is allowed by state law. Some of these lenders actually operate from overseas, or may claim sovereign immunity from state and federal consumer protection laws, so a borrower may have little or no recourse if they have a problem with how their loan or debt is handled.

To protect yourself, the Minnesota Commerce Department offers these tips:

First, consider alternatives. Short-term loans tend to be an extremely costly way to borrow money. If you are having trouble paying bills, contact your creditors to request extensions or negotiate repayment schedules. Some local banks and credit unions are offering special short-term loan options to customers who are federal workers. You may also want to talk to a family member or friend about short-term help.

Verify that any lender is licensed in Minnesota to provide consumer small and short-term loans. /commerce/licensing/license-lookup/index.jspCheck the License Lookup tool on the Commerce Department website. The company should have a “Consumer Small Loan,” “Industrial Loan and Thrift” or “Regulated Lender” license. If the lender is not licensed, don’t do business with it.

Read the fine print. No matter who you borrow from, always get a statement that clearly details all the costs of the loan. Be sure you know how much you will owe, when payments are due and how they will be collected. Never sign or agree to anything you do not fully understand.

Borrow only as much as you are able to repay. When you take out a loan, make sure you know how you will repay it by the due date. Interest and fees add up fast when a loan has to be extended, or “rolled over.”

Contact a local consumer credit counseling service. Assistance is available from nonprofit groups that, for no or low cost, can help you with budgeting, debt repayment and credit repair. To find a service near you, check with the National Foundation for Credit Counseling (www.nfcc.org).

Commerce is here to help

If you have a problem with an online lender, you can file a complaint with the Commerce Department. A consumer complaint form is available on the Commerce website (mn.gov/commerce). You may also send an email to consumer.protection@state.mn.us or call either 651-539-1600 or 800-657-3602 (Greater Minnesota).

Media Contact
Ross Corson
Director of Communications
Minnesota Department of Commerce
p: 651-539-1463 | c: 651-368-5050 | ross.corson@state.mn.us