Minnesota Attorney General Lori Swanson today filed suit against Allina Health System alleging that one of its subsidiaries violated Minnesota’s usury laws by charging consumers 18 percent interest on their medical debts.

Patients seeking care at Allina’s hospitals and clinics who were uninsured or whose insurance did not cover the whole cost of their care were frequently told they needed to either pay their bills in full immediately or enroll in MedCredit, a debt-financing program run by an Allina subsidiary.

They were told that if they didn’t choose one of those two options, their accounts would be turned over to collections agents, according to the suit, filed in Hennepin County District Court.

In general, interest rates on this type of “closed-end” credit are capped at 8 percent, said attorney general spokesman Ben Wogsland. State laws governing consumer debt are complex, but like most states, Minnesota allows different interest rates on fixed loans than on credit cards or mortgages, he said.

“We’ve been talking to Allina for months, and it’s been a moving target,” said Wogslund. “Medical costs are the leading cause of bankruptcy, the leading cause of foreclosure.”

In its suit, the state asks that Allina discontinue the practice, return any excess interest paid to MedCredit customers and pay civil penalties.

For its part, Allina issued a statement saying company officials were surprised by the suit. Allina already had lowered MedCredit’s interest rate to 8 percent, the company said. Further, it argues that the financing program is not governed by the usury statute because it is open-ended credit patients can use to pay for future care.

“The rates previously charged by Allina are consistent with Minnesota law for this type of credit,” a company press release said.

The complaint describes a number of consumer complaints about MedCredit.

In one instance, it alleges, an Allina employee who was facing emergency surgery at Unity Hospital and who did not have proof of insurance was “approached by an Allina representative, who presented her with a MedCredit application and stated that entering MedCredit would ‘help her make payments,’ and that it was just like a credit card for medical debt.” Even though the patient’s insurance eventually paid the bulk of her $15,000 bill, she was unable to obtain a loan later because MedCredit reported her debt to a credit bureau, the suit alleges.

The nonprofit Allina is the largest health care system in Minnesota.