This is a response to David Rosman's column: Two new Missouri Senate bills attempt to tackle payday loans.
The nature of payday loans is neither forgiving nor helpful to most Missouri consumers. Missouri's laws are some of the weakest in the country, allowing lenders to charge an average APR of 445 percent. As Mr. Rosman points out, several senators are now proposing legislation to change Missouri's payday lending laws.
Unfortunately, Mr. Rosman fails to understand that the Senate bills promising reform allow an APR of 300 percent — 10 times higher than the federal legislation adopted to protect military families from predatory lenders.
The federal legislation was supported by former U.S. Sen. Jim Talent and Congressman Sam Graves, both Republicans. In my opinion, the same protections given to military families should be given to hard working Missouri families.
Mr. Rosman is the rare consumer who was able to pay back his loan without going too far into debt. But, he is not who the industry targets. The target is the working poor, mostly young women, with children, who can't possibly pay the loan back without getting another loan. Because of the 300 percent APR still permitted under the current Senate proposals, this same spiraling debt trap will continue.
The CEO of Cash America, Dan Feehan, explains the predatory payday lending business best: "The theory in the [payday] business is you've got to get that customer in, work to turn him into a repetitive customer, long-term customer, because that's really where the profitability is." The most important factor in capturing these repetitive, long-term customers is the maintenance of unreasonably high interest rates that customers simply cannot meet.*
We are likely to see many new payday loan reform proposals in the legislative session this year — many of which will be written by the industry itself. The fact is the industry has hired leagues of well-paid lobbyists to take fast action this year due to the current initiative petition on the ballot. That petition, which caps the rate at 36 percent, has overwhelming support throughout the state, particularly among churches and the faith community. I say let the people vote. The public is demanding reform and we as legislators should not stand in their way.
State Rep. Mary Still is a Columbia Democrat.