As the nation continues to respond to the coronavirus (COVID-19) pandemic, the unfortunate truth is that few Minnesota consumers will escape the economic impact of this pandemic. Some Minnesota workers have already been laid off and may be looking for money to help make ends meet. In these uncertain times, the Minnesota Department of Commerce is warning Minnesota consumers not to borrow money from unlicensed lenders that advertise and offer short-term, payday, or installment loans, often advertised over the internet.

An unfortunate truth about the situation we are faced with is that predatory lenders will take advantage of people.

“Consumers may have little or no recourse if they have a problem with an unlicensed lender,” said Minnesota Commerce Commissioner Steve Kelley.

These lenders may advertise to consumers that they do not look at credit scores when determining whether to make a loan to a consumer. While that may be true, these online lenders pass along high costs to consumers for that added risk by charging consumers illegal interest rates.

“While an offer of immediate cash can be enticing, these loans often include interest rates and fees that exceed what is allowed by state law,” said Commerce Commissioner Kelley.

There are also companies that provide consumer loans under a “rent-a-bank” scheme. These companies offer consumer loans by partnering with a state bank located outside the state of Minnesota. By doing this, the companies are able to avoid Minnesota usury laws that limit the interest rates that a company can charge in the state.  Unfortunately, for this type of lender, consumers can be on the hook for these expensive loans and should be skeptical of companies that partner with a state-chartered bank outside of Minnesota.

To help consumers protect themselves, the Minnesota Department of Commerce offers these tips: 

• Verify that the lender is licensed in Minnesota to provide a loan. Consumers can verify a license here.  Licensed companies will have a “Consumer Small Loan,” “Industrial Loan and Thrift” or “Regulated Lender” license.  If a lender does not have a license, don’t do business with them.
• Read the fine print. No matter who you borrow from, always get a statement that clearly details all the costs of the loan. If a lender is unwilling to provide you with the contract upfront, that’s a major red flag. Be sure you know how much you will owe, when payments are due, how they will be collected and that you can afford repayment of the loan.
• Consider alternatives. Short-term loans can be an extremely costly way to borrow money. If you are having trouble paying bills, contact your creditors to request an extension or negotiate repayment schedules. Try to get a loan from your local bank or credit union.
• Contact a local credit counseling service. Assistance is available from nonprofit groups for little or no cost to you. To find a service near you, check with the National Foundation for Credit Counseling https://www.nfcc.org/.

If you have a problem with an unlicensed lender or questions about doing business with an online lender Commerce is here to help. Please contact the Commerce Department’s Consumer Services Center by email at consumer.protection@state.mn.us. We can also be reached by phone at (651) 539-1600 or (800) 657-3602, but at this time, e-mail is the most effective and efficient way to raise your concern with the Department.

Find the latest information on COVID-19.

With You Every Day

Wherever you are in Minnesota, the Department of Commerce is with you every day. Whether you’re filling up on gas, purchasing a home, working to reduce energy consumption or rebuilding after a disaster—we are with you, no matter what.

Media Contact:
Minnesota Department of Commerce
Brian Strub, Assistant Director of Communications
brian.strub@state.mn.us
651-539-1464.