Senator seeks to alter payday loan rules
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JEFFERSON CITY — State Sen. John Lamping had a warning for payday lenders yesterday: Take his bill seriously as a starting place for reform, or risk lawmakers’ moods if an initiative petition pushes the industry to extinction.
Lamping told the Financial and Governmental Organizations and Elections Committee he wants to address the aspects of payday lending that can trap unwary borrowers. Most borrowers using the high-cost credit use it responsibly, he noted, with only 6 percent of the 2.4 million loans made last year going unpaid.
“Those in the industry will fight this legislation,” Lamping, R-Ladue, said during a hearing on his bill to give borrowers 90 days to pay off the loans and create a database to prevent multiple loans. “My observation is that it is a matter of time. A ballot initiative will get on the ballot. And if this industry does not reform itself, … it will be on the ballot, and it will go away.”
Payday loans are made in amounts of up to $500 for periods of 14 to 31 days. They typically carry fees of about $20 per $100 borrowed, payable every 14 days.
Missouri law allows fees of up to $75 per $100 on a single loan, including renewals. Borrowers may renew the loan as many as six times, but lenders can limit the number of renewals to avoid exceeding the maximum fee. The maximum fee, calculated as an annual percentage rate, is 1,955 percent on a two-week loan.
Lamping’s bill would require payments every 15 days over the life of the loan. The loans would not be renewable, and borrowers would have to wait 24 hours before borrowing again. He said his bill was patterned off Florida regulations that have allowed the industry to remain profitable.
A petition drive to cut that maximum annual rate to 36 percent is being mounted by a coalition of religious and activist groups called Missourians for Responsible Lending. A second petition measure, which would set the rate at 13.9 percent “unless the parties agree otherwise in writing,” was filed for circulation by lobbyist Jewell Patek.
Payday lenders portrayed their business as a helping hand for people in a tight spot. Hilary Miller of the Consumer Credit Research Foundation called the bill “Soviet-like” interference in a free market.
“This is the only consumer credit product where the consumer decides how long they will be in debt,” Miller said. “I think that is a consumer-friendly product. Some people may agree with me.”
“The people who pay your salary,” Sen. Jolie Justus, D-Kansas City, said, expressing a bipartisan lack of sympathy for Miller’s position. “This is the No. 1 issue in my district. I think they should be rare, safe and legal.”
Sen. Kevin Engler, R-Farmington and the committee’s chairman, questioned Miller closely.
“You are not saying that these are smart,” Engler said. “You are saying they should have the right to make a bad decision if they want to.”
“I’m not saying this is a bad decision for most borrowers,” Miller replied.
Engler was skeptical. “I would love to see your finances. Many good decisions like this will lead you to bankruptcy.”
The committee did not vote on the bill. And Darrin Anderson, president of Missouri’s biggest lender, QC Holdings, owner of Quik Cash, seemed to get the message.
“I appreciate Sen. Lamping’s approach to this,” Anderson said. “We have worked with 35 states across the country to create positive legislation. There are clearly some things that can be improved in Missouri.”
Reach Rudi Keller at 573-815-1709 or e-mail rkeller@columbiatribune.com.
Copyright 2012 Columbia Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Article source: http://www.columbiatribune.com/news/2012/feb/07/senator-seeks-to-alter-payday-loan-rules/
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