Missouri lawmakers crack down on payday loans by…eliminating caps on interest and fees?
The notoriously despicable payday lending lobby in Missouri has a rich history of savagely fighting any proposed legislation that might eat into the industry’s absurd profit margins. Very surprising, then, that a payday loan reform bill sailed through the Missouri Senate last week.
By “surprising,” I mean, of course, “not surprising at all” because the bill, SB 694, is a not-especially-stealthy Trojan Horse for payday lenders in the state.
It sounds like a good deal at first: The bill would prohibit lenders from extending “rollovers” to borrowers. Rolling over a loan allows borrowers to delay paying off their principal at the expense of accruing the kind of interest and late fees that trap borrowers in cycles of debt.
But that’s an easy fence for lenders to hop. Instead of rolling over loans, they’ll just issue borrowers another loan. So now Borrower X has multiple loans to manage. Oh, and also? Under the proposed legislation, there will no longer be a cap on the interest rate that payday lenders can charge Borrower X for those loans. The previous cap – 75 percent of the principal, which amounts to 1,950 percent APR on a 14-day loan – was a regulation apparently too onerous for the industry.
Given that the payday loan industry has essentially bought off most Missouri legislators – as of 2012, it had spent “more than $1 million over the last decade to influence Missouri state elections…lobbyists and lobbying firms working for the industry have given at least another $648,460 to state campaigns,” according to this report – the success of this fake reform hardly comes as a surprise. The bill now heads to the House. Maybe contact your local representative if you have any concerns about this?
