Representative calls for payday loan reform

Tuesday, November 17, 2009 | 12:01 a.m. CST; updated 9:22 a.m. CDT, Monday, April 26, 2010
State Rep. Mary Still, D-Columbia, points out that the average loan amount for Missouri payday lenders has increased 30.6 percent from January 2003 to January 2009. Still and state Rep. John Burnett, D-Kansas City, hosted a hearing to review testimony regarding payday loan reform on Monday at the Columbia Public Library.

COLUMBIA — Stacy Applebee said she used to cry while working at a Columbia payday loan store two years ago.

She was one of a handful of speakers Monday night at a hearing on payday loan reform at the Columbia Public Library that was hosted by state Rep. Mary Still, D-Columbia. Applebee spoke about the stresses of working at a payday loan business.


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"I'm not proud of things I had to do, but I needed money for family," Applebee said at the hearing.

She said that when a customer was late paying their loan she would have to call them at least three times a day. She also told the audience, which included Still, state Reps. John Burnett, D-Kansas City; Stephen Webber, D-Columbia; Charlie Norr, D-Springfield; and Chris Kelly, D-Columbia, that working at the business was an "awful experience."

Still said that she wants to make changes to the payday loan industry in Missouri and that Monday's hearing was a part of her effort to further regulate the state's payday loan businesses.

She sponsored a bill during the 2009 legislative session that aimed to limit the fees and interest payday lenders could charge. The bill wasn't assigned a hearing until the last day of the session and never came up for debate.

"I guess I learned what they do when they don't want you to have a hearing," Still said Monday night.

Still said the bill she sponsored mirrored a piece of federal legislation sponsored by former U.S. Sen. Jim Talent, R-Mo., that called for interest rate limits of 36 percent with no loan renewals. One difference between the bills was that Talent's was aimed specifically at military families, while Still's applied to all Missouri residents.

The bill she proposed in 2009 would have capped interest rates at 75 percent of the principal loan amount.

She said that Monday's hearing may help her write a better bill that she hopes will come up for debate during the 2010 legislative session.

"I want to look at a little bit different way to write the bill — and it will be similar to last year — but I think we probably even need more regulation than I understood last year," Still said.

Many people with different backgrounds called for payday loan reform at the hearing — among them professors and religious leaders. Problems with high interest rates and multiple loan renewals were among the points raised. Another issue that was repeatedly brought up was whether people who use payday loans are making an informed decision.

Lobbyist Randy Scherr spoke on behalf of the United Payday Lenders of Missouri, which he said represents between 300 and 350 payday loan businesses within the state. He said that his organization has a "very savvy borrower."

"There were 2.8 million payday loans taken out in Missouri because people have found them to be convenient and cheaper than the alternatives," Scherr said, citing data from Oct. 1, 2007, to Sept. 30.

Scherr also said that payday loans often have lower interest rates than loans taken out at banks, bounced check fees and overdraft fees.

Still did not agree with his description of payday loan customers.

"I think it is absurd for the industry to come in and say these are savvy consumers," Still said following the hearing. "Clearly that is not the case, so it was just galling to hear it described that way."

Caira Dean, who works for the Columbia Housing Authority, argued that payday loan customers are uninformed as well.

Dean said that education in how payday loans function is lacking. She teaches Money Smart, a 10-week class on basic financial functions, and said that program participants are not fully-educated in the nature of payday loans.

"People feel like payday loans are their only option of getting out of a tight financial situation," Dean said.

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Timothy Harlan November 17, 2009 | 6:40 a.m.

When I heard testimony about this issue several years ago one 35 year-old man said he owned six stores. He explained in detail that they really were not very profitable. He also testified that he'd opened 4 new stores in the last year. Go figure?

(Report Comment)
Ryan Harris November 17, 2009 | 10:00 a.m.

"I think it is absurd for the industry to come in and say these are savvy consumers," Still said following the hearing. "Clearly that is not the case, so it was just galling to hear it described that way."

This is insulting to hear a government leader say the common people of the state are too uneducated to make decisions for themselves.

(Report Comment)
David Risher November 17, 2009 | 10:18 a.m.

Still commented to the Columbia Missourian last week that she wanted to learn more about the industry to propose a bill. So she's proposing bills when she doesn't really know how the industry works???????? Exactly what is she wanting to gain here??? Does she know how many teachers, state workers, etc use payday loans and appreciate the service? Are the teachers educated enough to teach our children, but can't understand that if you borrow a $100 you payback $115 in two weeks or you make a payment toward your loan of $20 for two more weeks up to six times (renewal). Can we say POLITICAL GAIN!!!!! Taking away a financial choice, especially in todays economy, is not benefiting anyone except maybe Still herself. Can the posters in the lobby of the stores or the font on the contract be made just a little bigger so that something else can be wrong!

(Report Comment)
Jeff Kursman November 17, 2009 | 3:23 p.m.

Could this "hearing" have been any more one-sided?

What about the tens of thousands of consumers that choose to use the product and use it responsibly, saving their families hundreds if not thousands in bank and credit union fees, penalties, etc.? Were any of these individuals invited to speak?

What about the dozens of Federal Reserve, Bretton Woods and FDIC researchers and professors from the nation's elite universities and colleges who have repeteadly shown the need for payday loans, refuted the arguments against them, and shown the negative impact on communities when payday loans are no longer an option?

Bill Black can make all the arguments against payday rates he wants but it doesn't change the facts that payday lending at $15-$20 per hundred is 1/3 to 1/5 of the cost of the average single, overdraft check according to the FDIC ($27 fee on a $36 overdraft)

Where exactly does Mr. Black suggest that people get the money to pay for unexpected expenses from car repairs to uncovered medical, dental, prescription and vet bills?

By his logic, let's deny people the right to convenience and buying a can of soda from a vending machine or a ball game because those providers shouldn't be allowed to charge fees to cover the expenses of staff, distribution, sales tax, electricity, equipment, etc.

Even better, let's get rid of mortgages. I don't mean the "predatory" kind that we all agree helped precipitate the current economic crisis and should be I mean all 30-year, 6% fixed mortgages...Why you ask?

Well, in your first 10 years of're paying 90% interest and 10% to the principal so all mortgage should be illegal...right?

Mr. Black and the rest of payday loan critics cannot provide a fair and equitable assessment of these products by continuing to refuse to compare them with the higher priced alternatives. You cannot evaluate products in a vaccuum!!! If paydayday lenders are driven out of the state, tens of thousands of Missouri families will have to pay more to banks and credit unions for overdrafts every year! And, if overdrafts are limited, individuals will pay even more in bounced checks to banks, credit unions and merchants....

(Report Comment)
Mark Foecking November 17, 2009 | 7:01 p.m.

The question no one has asked in this debate is why does it cost so much to bounce a check? But no one is calling for regulation of bank fees. That would be taking on a significantly more powerful adversary.

I think a lot of this is Rep. Still trying to position herself as a champion of the poor, for future political gain. If people are willing to pay to use these services, let them. Their ubiquity in the central city shows that they are needed.


(Report Comment)
Ayn Rand November 18, 2009 | 9:37 a.m.

Mark, there have been lots of calls for regulation of bank fees over the past few years. Some examples:

(Report Comment)
Walter Norton November 24, 2009 | 4:16 p.m.

If the intention was to help these people, the debate would be much different. We'd be talking about how people could better use the credit options they have and we'd be looking for ways to make consumers more "savvy." Instead, we’re debating taking away any access to credit by rate-capping these lenders out of business. The underlying assumption of the reform advocates is that some people too ignorant to have credit.

(Report Comment)
Ray Shapiro November 24, 2009 | 4:50 p.m.

("Walter Norton November 24, 2009 | 4:16 p.m.
If the intention was to help these people, the debate would be much different.")
I agree.
If the intention was to help people in need, we'd also be talking about how United Way agencies, (VAC), nonprofit/voluntary 501c3 organizations, (SIL, Salvation Army), and our communities' interfaith groups could administer low interest payday loans to "under-employed" individuals when they become strapped for cash.

(Report Comment)
Allan Sharrock November 29, 2009 | 5:23 p.m.

Here is a interesting article that shows how one late payment which would drop your credit score causes huge rate increases when you borrow money.

(Report Comment)
Jess B December 1, 2009 | 9:10 a.m.

I think what everyone forgets is that consumers understand the "bottom line." They know that it's cheaper to pay $15-$17 per $100 than go borrow $2000 from the bank and pay on it for two years. Consumers make the choice that works best for their spending habits (whether they be good or bad).

(Report Comment)
Katherine Richards March 18, 2011 | 2:20 a.m.

In fact, a lot of consumers provide complaints referring the high interested rates charged by payday loan lenders. This fact actually caused a wave of payday loan regulation that spread over the US. Besides, a lot of states have already provided particular laws regulating the industry. Mostly they cap the interest rates and perform also limits for the borrowers which are aimed to prevent the consumers from loading into deep debt.

(Report Comment)
Ricky Gurley March 18, 2011 | 8:38 a.m.

I will start of my rant with the usual: "Some people are just ignorant"!

I don't care what Mary Still's motives are; the fact is that she is on the right track here.

Payday Loan Interest Rates are usury to say the least.

The Payday Loan Business would have you believe that their customers are "Financially Savvy", which is the biggest crock that I have heard in a long time. These Payday Loan Customers are desperate people in desperate times that these Payday Loan Businesses simply take advantage of. These Payday Loan Businesses thrive off of people that miss just one payment, and they have no mercy or leniency once that happens. They simply "move in for the kill" without a second thought once a person misses a payment.

Now I'll grant you that nobody is making these people take out these loans and they choose to do it of their own volition. But there does in fact come a point where a business can take advantage of a consumer even if that consumer makes a conscious decision to use the services of that business. This is one of those cases. I know of people that are paying over 500% interest on loans that they took out from these places. That is just simply ridiculous, and anyone who thinks about that for a minute would see that it is usury and should be illegal!

The best term I can think of to describe a Payday Loan Business is: "Legal Loan Shark"!

Ricky Gurley.

(Report Comment)

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