From the Minnesota AG's office.
Internet Payday Loans Are Especially Problematic
Tight finances can lead people to look for instant payday loans on the Internet. People should be on guard against Internet payday lenders that evade state interest rate and consumer protection laws by operating online without proper state licensure. Numerous payday loan websites operate on the Internet. A customer generally types in his or her personal information, including Social Security and bank account numbers, and the loan is deposited into their bank account within hours. If the loan is not repaid on time (generally within two weeks), hefty finance charges are automatically debited from the consumer’s bank account every two weeks. The borrower can soon incur interest that exceeds the amount of the loan.
Some Internet payday lenders try to evade state interest rate and consumer protection laws by getting licenses in states without meaningful restrictions, by operating without state licenses at all, or by setting up operations outside of the country or under American Indian tribal authority and claiming that loans are made subject to the laws of the home country or tribe. Minnesota law, however, makes clear that online payday lenders that lend money to Minnesota borrowers are subject to the requirements of Minnesota law, even if the lender is physically located in another state.
People should always check—before they sign up—to find out if an Internet payday lender is registered with the Minnesota Department of Commerce to make small consumer loans in Minnesota. Some consumers encounter legal problems when they dispute the amount owed under an Internet loan contract. Also, consumers who borrow online often have difficulty communicating with Internet payday lenders, who can be hard to locate to resolve disputes. Be wary about giving out information online to unknown Internet companies. This can expose you to potential privacy and identity theft risks, and a disreputable Internet company can use your bank account information to drain your account.