City Council Plans to Table Springfield, Mo, Payday Loan Ordinances
By Lindsay Frankel
After the Springfield, Missouri, City Council discussed two potential payday loan ordinances intended to regulate lenders and protect consumers, City Council members announced that they would table the issue while they determine the best way to use the money from the permit fees imposed on lenders.
During the discussion, it was suggested that the fees be put towards financial education efforts to help consumers make informed decisions about payday loans. There was also discussion about working in conjunction with nonprofits or faith-based groups to provide alternatives to payday loans and title loans.
Last fall, the Springfield City Council proposed stricter regulations for payday loans and title loans in the city, and at a recent hearing, faith groups and consumer advocates came out to urge lawmakers to take action.
Payday loans are short-term loans that don’t require a credit check but carry exorbitant interest rates that make them difficult to pay back. Missouri payday loans are even more costly than in other states because of relatively permissive laws governing the industry. Missouri payday loans cost borrowers an average APR of 455 percent, according to Pew Charitable Trusts. A recent study even found that payday loans pose a health risk to Missouri residents, who suffered from physical and mental ailments as a result of borrowing.
Only the state legislature can cap interest rates on payday loans, but many cities in Missouri have introduced ordinances aimed at protecting consumers. Springfield’s proposed ordinances were modeled after similar regulations that have gone into effect in St. Louis and Kansas City. Each would have required that payday lenders undergo a background check and submit identifying information to the city, provide borrowers with a notice explaining all fees and interest rates, and notify borrowers of alternative options for financial assistance. One of the ordinances also proposed charging lenders a $5,000 annual license fee, which would need to be approved by voters.
The decision to table the ordinances was met with frustration from consumer advocates and faith groups. “We’ve been talking about this for years and nothing is being done,” said Rev. Emily Bowen-Marler, a member of Faith Voices of Southwest Missouri. She added that people need to be educated about the dangers of payday loans, since financial emergencies can make it more difficult to make an informed decision. “When your choices are between taking out a predatory loan and paying for your kid’s medicine or making sure the roof stays over your head … sometimes the best worst decision is take out the predatory loan. We need to make it so taking out a small, short-term loan isn’t economically devastating for a person.”
Councilman Craig Hosmer also voiced his concerns. “These people are paying 400 percent, the people that can least afford it. If that’s not something we should stand up against, I don’t know what is.”
Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Missouri, Columbia, Independence, Jefferson City, Joplin, Kansas City, Springfield, St. Louis and more.