| Kansas City, MO — A recent report showing that payday loan businesses in Missouri charged an average annual percentage rate of 422 percent last year has led to a renewed call for reform in the payday loan industry. That's an increase from a 2005 report showing an average of 408 per cent.
State Rep. John P. Burnett of Kansas City (D-40), with the support of Attorney General Jay Nixon, is the sponsor of House Bill 237. They are joined in Kansas Ciy in support of payday loan legislation by advocates for the poor, including Larry Weber, executive director of the Missouri Catholic Conference; and Michael Halterman, CEO of Catholic Charities of Kansas City-St. Joseph Inc.
Nixon noted that while eight neighboring states have strict limits on the interest rates and forbid renewals, Missouri has no real limit on interest charged and allows up to six renewals – effectively allowing the payday operator to charge interest rates of up to 1,950 APR.
The bill, which currenly is floundering around in committee, changes the laws regarding unsecured loans of $500 or less. The bill:
- Limits the interest and other fees that may be charged on the loans to $15 for the first $100 of principal for the first 30 days of the loan and not more than 3% per month thereafter, whichis an annual percentage rate of approximately 36%;
- Prohibits repeated renewals of loans to circumvent interest rate restrictions;
- Grants jurisdiction to the Attorney General to issue cease and desist orders against violators;
- Allows the Attorney General to sue for injunctions, rescission of loan contracts and restitution, and civil penalties
for violations; and
- Specifies that the limitations apply to all lenders, whether or not they are properly licensed pursuant to Chapter 408, RSMo
The biennial report, cited by the bill supporters, showed that the number of payday loans continues to rise in Missouri – approximately 2.8 million loans were issued for the one-year period that ended Sept. 30, 2006, an increase of 11 percent over the last report issued in 2005. Missourians borrowed more than $787 million from payday lenders in only one year, Nixon said.
There are now 1,545 licensed payday loan businesses, an increase of 347 from the previous report, issued in 2005. In addition, a study by the Center for Responsible Lending showed that Missourians paid $317 million in fees and interest on payday loans in 2005, second only to California nationally.
In 2002, SB 0884 sponsored by Ronnie DePasco (D-11) was signed by then-Gov. Holden that allowed the current interest cap at 1,950 percent.
Ironically, an Internet search on this topic will bring up at least four payday loan operators greedy for your business. The Joplin area has a growing number of payday loan businesses operating out of storefronts with such names as Quick Cash, Ready Cash and You-Name-It Cash Advance.
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