GUEST COMMENTARY: Why not vote on payday loan reform?

Sunday, April 25, 2010 | 5:10 p.m. CDT; updated 10:39 a.m. CDT, Tuesday, May 4, 2010

Consider these facts:

  • Missouri has more payday storefronts than almost any state and some of the weakest lending regulations in the nation.
  • The Better Business Bureau of Eastern Missouri reports that payday loan companies in Missouri can charge up to 1,950 annual percentage rates. The average APR is 430.64 percent.
  • The Missouri Division of Finance reports that Missouri law allows six loan renewals and a Missouri consumer can pay up to $395 in interest and fees on a $500 loan. All surrounding states forbid renewals.

Missouri's lax regulations have allowed an industry to mushroom throughout our state, encouraging chronic borrowing and taking advantage of low-paid, hourly workers such as those who work in our nursing homes. In fact, Missouri is the only state in the country that allows nursing homes to offer payday loans within the facility.

I propose we join most other states in the country and pass a law to change this. In fact, as a legislator I have drafted such a law, and I propose we have a vote on it.

Why not?

That turns out to be an interesting question.

House Bill 2116 limits APR to 36 percent and allows a 90 day payback period. It is the same measure passed by the federal government to protect military families and supported by Missouri's former U.S. Sen. Jim Talent.

This bill, co-signed by 70 legislators, has the support of numerous religious groups, the AARP, Habitat for Humanity, Better Business Bureau and the Silver Haired Legislature. In fact, there has been no opposition to the bill other than that of the lenders themselves.

So, what seems to be the problem? Why not vote on this?

That is a question for the Speaker of the House of Representatives Ron Richard,R-Joplin, and Majority leader Steve Tilley, R-Perryville. Last year, it was not even assigned to a committee until the final day of the session - the surest way to kill a bill.

This year, following a groundswell of public outcry and five public hearings, it was assigned to the Financial Institutions Committee. Unfortunately, it was a hearing where only one side was allowed to testify — the payday loan side. And, the even more tragic, the presiding chair of the hearing, Don Wells, owns a payday loan store, Kwik Kash, in Cabool.

Appropriately, 60 House Democrats signed a petition of discharge, as allowed by the constitution, and moved the bill to House floor for debate and a vote.

Richard has said he does not want floor debate. Tilley has said he will not allow a debate, much less a vote.

Why not?

If there is no need for reform, vote the bill down. If the people of Missouri are clamoring for predatory lending tactics and quadruple APRs, then vote it down.

But, why not have a vote so that Missouri citizens know where you stand?

BINGO. Maybe, I have just answered my own question.

State Rep. Mary Still is a Columbia Democrat.

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Allan Sharrock April 25, 2010 | 7:48 p.m.

Mary how about letting the free market put them out of business if their lending practices are so bad.

(Report Comment)
Alice Thompson April 26, 2010 | 10:36 a.m.

I agree, but think that as long as we are looking at fees in lending- we should look at the banking system. The system that banks run on is far more costly, and has an affect on far more people the payday lenders. Not to mention the fact that when you are dealing with payday loans- you go into it being aware of the risks and fees, whereas when dealing with the more "reputable" bankers you are not going into it expecting to get screwed- they hide the fees and you in many cases can't aviod dealing with them. Many employers now require you to have a bank account for direct depposits. Many bank automatically "give" you overdraft "protection"- so that if you need to buy a pack of gum for example- they will let you- even if you dont have the dollar in your account- then they can go ahead and charge you an additional $35.00 for the "protection" against having your card declined at the store. Then while you sit and chew your $5.00 stick of gum you can ponder the much higer interest you're paying on that $1.00 loan that the bank gave you- that must be paid back in a much shorter time frame than the payday loan would have provided. At least with the payday lender- they don't pretend to be your friend, you know how much you are getting- and at what rate. You know the due date, and the terms. While they might not be good terms, it is more of a service than banks provide for those who are in need. Bankers are far more dangerous loan sharks than loan companies, because of the system in which they opperate. Maybe if the bankers stepped up the serivces they offered the payday lenders would follow suit. The banks have far more resources to change the structure of thier fees. The payday lenders are here based on the same laws of supply and demand that apply to any business. The fact that you see so many is because the need for that service is high in this area, and debt is a revolving door. When people are short on money in the bank account- the bank will put through the largest $ debit followed by all others in suit- to maximize the amount of fees that they can charge. They can take a person on the edge and push them over the brink in fees alone. Just as if you have a deposit and a check presented at the same time- the bank processes your check first and deposit last. Everytime I have taken out a loan with a payday lender it has been to aviod bank fees- and it has saved me money. I would love a better alternative- but the banks are leading the pack. Target them and the others will follow. The banking system requires top down reform- not bailouts!

(Report Comment)
Sally Claunch April 26, 2010 | 10:52 a.m.

I agree with Allan and imaperson.
Payday loans are for two-weeks not an entire year, and comparing them to ANNUAL interests rates is misleading.
At 36 percent APR, the total fee charged on a $100, two-week advance, would be $1.38. Payday advance lenders could not cover the cost of originating the loan, let alone meeting employee payroll and benefits and other fixed business expenses, like rent.
Such a rate cap would virtually eliminate payday lenders, but not the need for short-term credit. Instead it forces consumers to choose between more expensive alternatives, such as fees for bounced checks, overdraft protection, late bill payments, reconnection fees for a utility discontinued for lack of payment or even unregulated off-shore Internet lenders.
I work in the industry, and working adults are best served when given a variety of options and trusted to make financial decisions based on what’s best for them and their families.
My company charges $15 for every $100 borrowed for two weeks.

(Report Comment)
Allan Sharrock April 26, 2010 | 3:57 p.m.

I think that is a pretty fair rate to loan to a person who I don't know.

(Report Comment)

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