JEFFERSON CITY • Gov. Jay Nixon today vetoed regulations passed by the Missouri Legislature to restrict payday loans, saying it wasn't true reform.
Supporters of the bill say it's a step in the right direction, providing protection for consumers but still allowing payday lenders to operate.
Nixon disagrees. In his veto message, Nixon said “payday lending often perpetuates an endless cycle of debt for consumers who can least afford it, and this bill fails to protect Missourians from being caught in this downward spiral.”
Communities Creating Opportunity, a faith-based community organizing group, applauded Nixon's veto, calling it a "major victory" for the state's working poor and faith community.
Under the current law, short-term loans for between 14 and 31 days and up to $500 can be renewed or “rolled over” up to six times and interest can continue to accumulate.
The bill would have banned consumers taking out a new short-term loan instead of paying off the previous one. It also required lenders to offer “extended payment plans” to a borrower. No additional interest or fees could have been charged during the extended 60- to 120-day payment period. Borrowers would only have been able to get one of these deals in a year.
Additionally, the bill capped interest and fees on a loan at $35 per $100 in principal. This contrasts with what Missouri currently does: capping interest and fees on a loan at 75 percent of the original principal, and payday loans can last for between 14 and 31 days. That would allow a lender to charge $75 on a $100 loan over 14 days – an interest rate over 1,950 percent.
The bill passed the House 112-39 and the Senate 26-4.
The Legislature's attempted reform was not enough, Nixon said, and he encouraged lawmakers to try again next year.
“Missourians want meaningful payday lending reform, not a sham effort at reform that allows such predatory practices to continue,” Nixon said.