Earlier this month, the Minnesota Supreme Court granted the petition for writ of review of a Court of Appeals decision (and trial court decision) that went against a payday lender, Integrity Advance LLC (“Integrity”).
Integrity does not have a license to operate as a lender in Minnesota...Integrity denied making any payday loans to Minnesotans, claiming that its website prohibited Minnesota applicants from completing the online application…Integrity again denied making loans to Minnesota residents, claiming that the complaints in question must relate to people who had previously lived in other states or had indicated on the loan application that they lived in another state.
[In fact, after the parties undertook discovery, it turned out that] Integrity made 1,269 payday loans to borrowers who had indicated on their loan applications that they resided, worked, and banked in Minnesota.…Integrity’s business records indicate that it directed approximately 27,944 contacts to Minnesotans for the purpose of doing business in Minnesota.
Integrity charged Minnesota borrowers annual interest rates of up to 1,369% on its payday loans. For first time borrowers who borrowed up to $500, Integrity charged $30 every two weeks per $100 borrowed. Under its auto renewal payment plan, which Integrity imposed on borrowers who did not pay off their loans within their first payments, Integrity withdrew this $30 fee every two weeks for a period of eight weeks. … The effect of these loan renewals was that borrowers paid more than $1,400 in interest on a $500 loan and more than $2,000 in interest on a $700 loan.
Can we agree that integrity has nothing to do with this company?
But, actually, there are (as always) more subtle and complex issues deep beneath this layer of bare-knuckled commerce.
First, there is, of course, the underlying free market philosophy that most of us accept as a positive aspect of our political and economic system. Integrity will argue that it complied with the laws and none of its
victims customers were forced directly or indirectly to throw themselves off of towering cliffs of debt do business with Integrity. How dare we act as if Integrity has done anything immoral when, it will argue, it has done nothing illegal? It has simply participated in the free market as we all do. Some of us lend money to poor people, an undoubtedly challenging business model, and others of us scrape by in other ways, hypocritically feeling superior to the Integrities of the world.
A second complicating question is who is responsible for policing national companies like Integrity? Minnesota? Or would it be the federal government whose job it is to separate
nauseating exploitation impermissibly aggressive lending practices from allowable lending practices?
Presumably the Minnesota Supreme Court accepted review of this case to address the issue of the so-called “Dormant Commerce Clause” issues — the idea that the U.S. Constitution’s Commerce Clause giving the federal government the task of regulating interstate commerce implicitly bars states from regulating interstate commerce.
There are other issues that the Minnesota Supreme Court may be interested in (for example., how damages were determined, the injunctive relief ordered). But, regardless of the Supreme Court’s decision, based on the findings in the Court of Appeals opinion, it is unclear to me how Integrity can emerge with its integrity in tact.