Moorhead officials explore alternatives to payday loans

MOORHEAD-City and state officials gathered here Monday June 4 to discuss ways to help Moorhead residents avoid what a nonprofit calls the ‘debt trap’ of loans on salary.

Exodus Lending, which helped organize Monday’s meeting, says many area residents taking out payday loans face fees and interest rates above 200% after getting stuck in a cycle of indebtedness marked by the constant renewal of loans and the payment of interest and fees on an ongoing basis.

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According to the organization, in 2016, at least 1,156 Clay County borrowers paid about $ 303,000 in interest to payday lenders, the money according to Exodus Lending could go to groceries, children’s medications and university savings accounts.

Based in the Twin Cities, Exodus Lending offers help to borrowers by refinancing existing payday loans while charging no interest or fees, said Sara Nelson-Pallmeyer, executive director of the association.

Nelson-Pallmeyer and other attendees at Monday’s workshop said people often resort to payday loans in the face of an immediate financial crisis without weighing the ultimate costs involved.

Nelson-Pallmeyer advised that before taking out a payday loan, other options be strongly considered, including borrowing from friends or relatives, working more hours and cutting expenses.

“Because that’s what they’re going to have to do to get out of the cycle; they might as well do it before they get into the cycle, if they can,” said Nelson-Pallmeyer.

“Even putting money on a credit card isn’t as bad as payday loans,” added Nelson-Pallmeyer, whose organization helps Minnesota residents by taking over payday loans and making payday loans. getting reimbursed by the people they help.

She said the organization established in 2015 has helped dozens of people, with a successful recovery rate of around 95%.

Among those who do not reimburse the organization, some have filed for bankruptcy, which Nelson-Pallmeyer says is something of a victory for the consumer.

One of the workshop participants was Dean Grier, pastor of First Lutheran Church in Audubon, Minn.

The church has taken the initiative to set up a program that offers small interest-free loans of up to $ 1,000 to people who live in the Audubon zip code or have children in the Audubon school district. -Lake Park.

The program sparked the curiosity of many at Monday’s meeting, including Pastor Sue Koesterman, executive director of Churches United for the Homeless, a homeless shelter where the meeting took place.

Koesterman said that sometimes one financial crisis leads to another and then another, causing a cascade of hardship that individuals may find it difficult to escape.

“They lose the ability to think about the future,” Koesterman said.

Grier agreed and gave an example where church officials recently struggled to provide a loan to a woman who is struggling to become a nurse.

He said the woman’s application did not quite meet the criteria set for granting loans, but she did get one anyway.

“I could see her breathing again,” Grier said. “She was able to think about the future again.”

The Community Financial Services Association of America, an industry group representing many payday lenders in the United States, is aware of the image of the industry and posts information on its website highlighting the need for payday loan companies.

The information includes a 2017 Federal Reserve report that found 40% of Americans would struggle to cover an unforeseen expense of $ 400.

The report also states that more than a fifth of adults are unable to pay their monthly bills in full.

“The Federal Reserve report proves what we have known for a long time: Millions of hard-working Americans live on paychecks and struggle to close financial gaps or pay for unforeseen expenses,” said Dennis Shaul, CEO of the ‘association.

Aiming at what he called misguided attempts to regulate the industry, Shaul said the demand for low dollar credit will continue to exist even if payday loans are no longer available.

“Removing consumer access to low-value loans made through legal and approved lenders will only exacerbate the financial hardships millions of Americans face and force them to turn to non-illegal lenders. regulated operating in the shadows, ”Shaul said.

According to the association, around 12 million households use small loans each year.

Grier said the local church’s loan program, called Neighbors Lending, aims to provide a cheaper alternative by creating a pool of funds from donations from members of the First Lutheran congregation and a handful of others. churches in the area.

Members of the congregation can get their money back after the loans are paid off, but Grier said many donors seem to be okay with letting their money continue to flow in the community indefinitely.

Grier said that given the experience of Exodus Lending, they are hopeful that reimbursement rates will be high.

“We tell them, ‘Every refund you make helps the next person on the road,’ ” Grier said.

For more information on Exodus loan programs, call (612) 615-0067 or visit

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