Payday loan restrictions get initial approval from Missouri House

Wednesday, April 13, 2011 | 4:16 p.m. CDT; updated 10:34 p.m. CDT, Wednesday, April 13, 2011

JEFFERSON CITY — Payday loan businesses would see new legal limitations on rates and payback periods under a bill given initial approval by the Missouri House of Representatives.

The House voted along party lines for a bill that would change several provisions on payday loans. The bill would lower the total maximum interest rate for borrowers to 60 percent instead of the current 75 percent rate over 14 to 31 days. The bill, sponsored by Rep. Ellen Brandom, R-Sikeston, would also limit the number of times a borrower can rollover or renew their loan from six times to three.

Rep. Mary Still, D-Columbia, said Brandom's bill did not qualify as reform and the reduction in the number of rollovers is obsolete because Missouri has an average of 1.7 rollovers, nearly half the number allowed under Brandom's bill.

"This is disguise — not reform," Still said.

Brandom said her bill protects the consumer while also preventing the payday loan industry from going bankrupt. She said her bill resulted from an ad hoc committee appointed by Speaker of the House Steven Tilley, R-Perryville, that was created to address the payday loan industry.

Democrats said because of the high rates still allowed in Brandom's bill, it does not do enough to protect the consumers, and it benefits payday lenders.

"This bill is a gift to the industry," Still said. Still previously offered an alternative bill that would have reduced the annual percentage rate to 36 percent and not allow borrowers to rollover their loans. Her bill did not make it out of committee hearings.

Critics of Brandom's bill said the industry is harmful to communities and families.

"Payday loans are like blood banks and pornography shops, ... you don't want them in your neighborhood," said Rep. Rory Ellinger, D-St. Louis County.

Supporters of the bill said it is not the government's responsibility to regulate the industry.

"The least government interference in this, the better," said Rep. Steve Cookson, R-Fairdealing.

Industry supporters said payday loans provide a necessary service to people who normally would not be able to acquire a loan and said the bill represents reform to the payday loan industry.

"This bill is a consumer-friendly bill; every provision in this bill makes things better for the consumer," Rep. Don Wells, R-Cabool, said.

One Democrat disagreed.

"This bill is not a baby step forward, it's one giant step backward," said Rep. Eileen McGeoghegan, D-St. Louis County.

The bill passed along party lines with a vote of 99-57 and needs one more vote in the House before moving to the Senate.

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Donna Smith January 30, 2012 | 3:51 a.m.

Most states have usury laws that limit the interest that can be charged, usually somewhere between 6 and 12 percent. However, in the 1980's special exemption was made for banks, loan companies and other entities due to inflationary conditions. There are more choices here than charging no interest and charging exorbitant rates that are virtually impossible to pay back. A reasonable rate of return on a loan doesn't drown the borrower in permanent indebtedness.

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