Sure Advance LLC, an internet-based payday loan company, agreed to stop lending in Minnesota and pay $760,000 in damages for charging residents of the state unlawful interest rates of up to 1,564 percent.
Minnesota Attorney General Lori Swanson announced the settlement with Delaware-based Sure Advance. The settlement has been deposited into a consumer restitution fund, and the proceeds will be used to refund more than 1,200 consumers who received loans.
The attorney general filed a lawsuit against the company - and four other lenders - in September 2011 after receiving a growing number of consumer complaints.
Some consumers reported getting phony collection calls from international criminal fraud rings after entering their private data into the website of an online lender. The criminal callers falsely tell consumers that they owe money on a loan and will be arrested or go to jail if they don't immediately pay it back.
Internet payday lenders that lend money to Minnesota borrowers must comply with state laws, even if their physical headquarters are in another state. Under Minnesota law, for loans between $350 and $1,000, payday lenders cannot charge more than 33 percent annual interest plus a $25 administrative fee.
For loans less than $350, Minnesota law caps the fees that may be charged on a sliding scale as follows: $5.50 for loans up to $50; 10 percent of the loan amount plus a $5 fee on loans between $50 and $100; 7 percent of the loan amount (minimum of $10) plus a $5 fee on loans between $100 and $250; and 6 percent of the loan amount (minimum of $17.50) plus a $5 fee on loans between $250 and $350.
In 2011, the internet loan industry reported loan volume estimated at $13 billion to millions of customers nationwide. A payday loan is a short-term, high-interest loan, often under $500, targeted at borrowers who need money between paychecks. The high-interest rates, recurring finance charges, and refinancing of the loans can cause the amount owed on the loan to increase rapidly in a short time.