Statement by Infin Executive Director Ed D’Alessio in Response to Minnesota Governor Tim Walz Signing Legislation Adopting an Unworkable Interest Rate Cap on Short-Term, Small-Dollar Loans
“Minnesota’s elected officials have chosen to deny their constituents access to the regulated, transparent credit options they need and value, with little concern for the consequences. Minnesotans’ need for credit won’t disappear, but their regulated borrowing options will.
“Minnesota’s new interest rate cap on small consumer loans is not about consumer protection. Rather, it effectively eliminates the regulated small-dollar lending market and with it, critical options to enable consumers’ financial inclusion and stability. No lender can sustainably offer broadly accessible short-term, small-dollar loans under such a rate cap while still covering basic operating expenses, unless subsidized.
“This law will do nothing to ease the financial challenges faced by Minnesota families. Instead, confronted with a credit need, many will have little choice but to turn to riskier, costlier alternatives. Minnesota will soon learn the hard way what other states with antiquated, arbitrary rate caps have experienced: in the absence of the licensed small-dollar lending marketplace, unregulated, illegal lenders will proliferate, as consumers have nowhere else to turn. Complaints will skyrocket, with little recourse for borrowers.”