Minnesota judge orders online payday lender to pay nearly $8 million

An Internet payday lender charging Minnesotans interest rates as high as 1,369 percent has been ordered to pay nearly $8 million for operating in the state without a license.

Ramsey County District Judge Margaret Marrinan issued the ruling Friday against Integrity Advance LLC, granting a motion for summary judgment by Minnesota Attorney General Lori Swanson.

Integrity Advance is one of eight online payday lenders that Swanson sued in recent years as part of a crackdown on unlicensed online lenders making loans to Minnesotans. The state reached settlements or default judgments with the other seven short-term lenders; Integrity is the last and the award is the largest of the cases.

"Unlicensed payday lenders, which willfully skirt Minnesota law, hurt consumers by charging outrageous interest rates," Swanson said in a statement. "We hope that today's court ruling, together with our previous lawsuits, will make others think twice."

Executives at Integrity Advance, based in Newark, Del., could not be reached Friday for comment.

In an interview, Marrinan said the state originally sought a smaller amount from Integrity. She said she pursued the higher figure due to the sheer number of loans the company made in Minnesota, the fact that it was targeting the most financially vulnerable people and because the company lied to authorities about its lending.

Not only was Integrity not licensed to do business in Minnesota and charging usurious interest rates, Marrinan said, but when complaints surfaced in 2010 and authorities questioned the company about its Minnesota operations, it denied it did any business in the state.

The company later conceded that it made 1,269 loans to Minnesotans. It also routinely e-mailed Minnesota borrowers who had paid off their loans to take out new ones, and called them at their homes and at work.

"Talk about misrepresenting things," Marrinan said. "They lied."

In a memo attached to the order, she wrote: "The supersized rate of interest reflects predatory lending of a breathtaking magnitude."

Marrinan ordered Integrity Advance to pay the state $7 million in combined statutory damages and civil penalties, and $705,308 in restitution to borrowers for the illegal interest charges and fees it charged. The company also will have to pay the state unspecified attorneys' fees for its effort investigating and litigating the case.

According to the memo, the company violated numerous Minnesota laws by, among other things, charging interest rates above the state's caps, routinely renewing the loans and extending the terms beyond 30 days, not providing adequate disclosures and using loan contracts that included a ban on class-action lawsuits.

Marrinan said she wanted the penalty to be in proportion to the wrongdoing, and get the company's attention. "If you're going to do business here you're going to do it according to our rules," Marrinan said.

According to the memo, the company tried to argue that it was unconstitutional to try to apply Minnesota law to its loans in Minnesota, because its business operations were outside the state and it didn't have a sufficient "nexus" to Minnesota. The court rejected the argument.

When the company appealed that decision, the state Court of Appeals said it wasn't going to review the matter because the decision "does not appear to be questionable."

Jennifer Bjorhus • 612-673-4683