910% Payday Loan Interest Rates Are Allowed by the Bill

Missouri House Committee considers payday lending industry regulations nowadays. The debates took place during April 2018, and the Committee for Financial Institutions is going to regulate the current payday lending industry. The bill that aims to protect the interest of the low-income and poor families within the state but still maintains status quo for the lenders was passed last week.

The enactment is sponsored by the state representative, Mr. Steve Helms, who is the chair of the Subcommittee on Short-Term Financial Transactions. Mr. Helms declares that the bill is to address only the crudest payday lending abuses, but the consumer organizations consider it to be too permissive, demanding to stop it.

Missouri Payday Loans Situation

Missouri is known for the quite prosperous payday lending industry. The lenders are numerous here. In 2017, they have issued 1.62 million payday loans, and it means that 1 in 4 Missouri residents are borrowers.

Till now, the industry was governed by the Statutes 408.500.1 et seq. that was revised recently. According to the regulations, the lenders were to be licensed by the state Division of Finance. Additionally, the laws required the loans to meet the following limits:

According to the statute that is still in force now, the maximum APR based on the $100 on 14-days interest rate calculations made 1950%. The average APR in Missouri makes 468.72%. Additionally, some fines and fees are applied. That’s why the consumer organizations do not consider payday interest rates to be beneficial either for the families or for the state economy overall, claiming for the short-time loan interest rates lowering or equalizing.

The New Payday Loan Bill Realities

The new bill HB 2657 that is moved forward by the Missouri House is going to allow 36% interest rate in two weeks. It is about 3 times less than before but translates into 920% APR. Therefore, the consumer groups and organizations, fair payday lenders, labor and common borrowers that wanted to lower the rates to 36% APR, are unsatisfied with the bill provisions. They insist that it won’t change the status quo in the industry.

The activists state that the rate cap in the surrounding states is 15%, and demand the legislative officers to implement the similar regulations in Missouri to protect the state citizens.

Additionally, according to the bill, the number of renewals that are completely prohibited in the surrounding states is reduced from 6 to 2. The representatives of consumer groups consider this step insufficient, stating that the provisions are too permissive and they won’t change the payday lending situation.

The organizations’ representatives think that returning borrowers that take several payday loans a year won’t feel better after the bill enactment. Even the citizens of the surrounding states where the loans are prohibited take from 9 to 12 loans per year on average.

Finally, the bill is to reduce the operational fee for payday lenders from $300 to $500 per year. It will make the operations less expensive, supporting the payday lenders.
Thus, the activists urge to reject the HB 2657 bill and enact stricter regulations that would really protect the customers.

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