Can We Solve the Payday Loan Debt Trap?

The crisis often begins with a car repair or a surprise medical bill. This can end with a consumer in heavy debt paying hundreds or even thousands of dollars in interest and fees to a payday loan company.

Payday loans are short-term consumer loans that charge so high that borrowers end up paying that amount at triple-digit interest rates. Loans have come under more criticism recently as payday lenders increased online advertising to people pressed by the pandemic recession.

In January, Illinois became the last state to spend a 36% interest rate cap on payday loans. Consumer groups support a similar bill to the Minnesota Legislature modeled on the protections of the Military Loans Act, which was enacted in 2006 to cap interest rates for active duty military personnel and their families.

Are Payday Loans a Legitimate Service for People in Crisis? What better alternatives exist? How to regulate consumer credit?

MPR News guest host and senior economics contributor Chris Farrell spoke with a law professor and nonprofit advocate on how to deal with payday loans.


  • Sara Nelson Pallmeyer is the Executive Director of Exodus Lending, a Twin Cities nonprofit organization that refinances payday loans as interest-free loans.

  • Creola Johnson is Professor of Law at Moritz College of Law at Ohio State University in Columbus, Ohio.

Use the audio player above to listen to the program.

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