Payday Heyday II: Surprise! It's not a reform bill at all!

2011-03-25T21:00:00Z 2011-04-18T16:45:02Z Payday Heyday II: Surprise! It's not a reform bill at all!By the Editorial Board
March 25, 2011 9:00 pm  • 

Under the guise of “reform,” the Missouri House of Representatives has advanced a bill that actually would loosen restrictions on the payday loan industry. That’s pretty galling, given that Missouri already is one of the friendliest states in the union for short-term lending sharks.

In playing footsie with the payday lending industry — which contributes hundreds of thousands of dollars to their campaigns — Missouri lawmakers are bucking a trend in which 17 other states have cracked down on the industry. Included are the rock-ribbed Republican states of Arizona and Montana.

The payday loan industry in Missouri claims it is providing a service, making short-term, unsecured loans to people who otherwise would be unable to get credit. But states where interest rates have been capped at 36 percent still have people who need short-term loans. They get them from responsible lenders who are happy to operate under the new caps.

In 2008, Missouri had more than 22,000 payday loan outlets, according to the Better Business Bureau. The industry makes more loans in Missouri than in any state but California, which has more than six times as many people.

First in puppy mills and first in payday loans. What a slogan. What a state.

On March 16, the House Financial Institutions Committee considered two payday loan bills. One, House Bill 132, sponsored by Rep. Mary Wynne Still, D-Columbia, would have capped annual percentage rates at 36 percent and imposed other safeguards. Naturally, it was defeated.

The committee approved House Bill 656, sponsored by Rep. Ellen Brandom, R-Sikeston, last noted in this space for sponsoring a bill for a lobbyist friend whose clients were trying to corner the market on cannabis delivery-by-cigars. Ms. Brandom’s payday loan bill is worse than that one.

It was written with the help of industry representatives, gathered in a “working group” by House Speaker Steven Tilley, R-Perryville. Ms. Still was not part of the working group, nor were any representatives of consumer groups.

HB 656 would authorize a maximum annual percentage rate of 1,564 percent for short-term loans of $500 or less. This is “reform” in the sense that it’s lower than the current maximum of 1,950 percent. We wonder how the industry will survive at a mere 1,564 percent.

Easy. The bill allows lenders to decide whether to extend loan periods and reduce the principals with each payment. Missouri courts have ruled that such extensions and reductions are mandatory. The bill simply changes the word “shall” in the payday lending law to “may.”

The typical payday loan in Missouri is for $300 and has a 14-day repayment requirement. HB 656 would allow that loan to be renewed three times, at the lender’s discretion. Assuming the loan was renewed all three times, the annual APR on the typical $300 loan would reach 459 percent. That is higher than the current 444 percent average on payday loans.

The committee vote in favor of the bill was 13-3. Among those voting aye was the committee chairman, Republican Don Wells of Cabool, who recently sold his interest in Qwik-Cash of Cabool.

Area Republicans joining Mr. Wells were Scott Dieckhaus of Washington and Vicki Schneider of O’Fallon. Proving that predation knows no party, two area Democrats also voted aye: Jamilah Nasheed of St. Louis and Mary Nichols of Maryland Heights.

They should all be ashamed.

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