House financial committee considers Missouri payday loan bills

The state flag of Missouri.

The Missouri House is considering two payday loan bills, but only one provides reasonable protection for both consumers and business. (Photo Credit: CC BY-ND/Regions of Missouri)

The Missouri House Financial Institutions Committee is prepared to hear two new bills that could affect payday loans in the state, reports the Columbia Daily Tribune. Committee chair Rep. Don Wells (R-Cabool), who is the former owner of a payday loans company, will hear personal loan bills by Rep. Mary Still (D-Columbia) and Rep. Ellen Brandom (R-Sikeston) at 5 p.m. Wednesday at the Jefferson City Capitol Building. While Rep. Still’s HB 132 calls for drastic limits to state payday lenders, Rep. Brandom’s HB 656 takes a more moderate approach.

‘Consumer protections without killing the personal loans industry’

Rep. Wells told the Daily Tribune that any payday loan legislation that makes in through the Missouri Congress should implement “consumer protections without killing the industry.” His ideas are more similar in shape to those in Rep. Brandom’s Missouri HB 656, in that he supports limiting the number of payday loan renewals Missouri consumers can arrange; having at least a two-week “cool off” period; making sure that the fee per $100 borrowed on a personal loan is clearly posted for consumer consideration as a dollar amount, rather than a percentage; and allowing consumers to make long-term repayment arrangements without excessive penalty.

As Brandom told local media, the average payday loan in Missouri costs $17 for every $100 loaned.

“To me, that is the easiest way to understand it,” she said.

Still’s Missouri HB 132 hovers over dangerous 36 percent APR barrier

Rep. Still takes a more hard-line approach to personal loans. Her bill proposal seeks a 5 percent limit to the cost of payday loans, with a cap of $25 total. In addition, interest of more than 36 percent APR would not be allowed, even when the repayment period exceeds 90 days. Numerous studies have shown that a 36 percent APR is not sustainable for a business with any overhead whatsoever, a fact that, if Still’s words are to be believed, shows the FDIC simply does not understand the business model clearly enough to justify an official ruling.

“You can make money at 36 percent,” she said. “Some companies offer money at 18 percent. It is what the FDIC says is a reasonable rate.”

If Rep. Still’s aim is to protect consumers, then driving payday loan companies out of Missouri and forcing consumers with a need for the product to resort to less reputable, unregulated sources is inconsistent with her stated goal. Even the Missouri Catholic Conference, which has entered its own payday lending model for consideration, has not been insistent on a 36 percent APR.

Missouri’s largest personal loan company sounds off

A 36 percent APR would devastate smaller lenders with lower margins, but even the largest high-margin payday lender operating in Missouri – QC Holdings – cannot operate under such restriction. From a 2009 Missouri Better Business Bureau report, a QC Holdings representative said:

“Any federal law that would impose a national 36 percent APR limit on our services … would likely eliminate our ability to continue our current operations.”


Better Business Bureau

Columbia Daily Tribune

Get started some reason when thinking about payday loans