Missouri House committee considers payday loan regulations

Inside Subprime: April 6, 2018

By Kerry Reid

Payday loans in Missouri are notorious nationwide. The “Show-Me State” has some of the laxest regulations in the nation for the short-term loan industry. But recent proposed legislation may offer some moderate relief – if it can pass in the state legislature.

Missouri State Representative Steve Helms (R-Springfield), chair of the Missouri House Subcommittee on Short Term Financial Transactions, is sponsoring a bill that he says will address some of the worst abuses in the payday loan industry, while still preserving access to loans for people with bad credit who need them.

According to an article by Brianna Lennon published last September by the Columbia Business Times, Missouri allows an average APR of over 450%.

The provisions being considered in Helms’ bill will not cap the APR rate. It would, however, cap fees and interest at 35% of the amount of a short-term loan, as opposed to the current 75% threshold. Other regulatory changes proposed in Helms’ bill include: reducing the number of times a borrower can renew a loan from six times to two; reducing annual licensing fees for payday lending locations from $500 to $300; and allowing an extended payment plan to be used by some borrowers.

In a radio interview with Gary Nolan of KSSZ 93.9, Helms cited reports that the federal Consumer Financial Protection Bureau aims to cap the APR at 36% – a move he opposes. Helms said “If there is not some rational regulation, there will be political pressure” to pass the interest rate cap.

Missouri city governments have also taken aim at what they view as predatory practices.

The St. Louis City Board of Aldermen passed an ordinance in 2016 to regulate the industry. It imposed fees of $5,000 per loan establishment and created a regulatory body to inspect these businesses. It also “requires a posting of interest rates and fees in clear and concise format, quantifying the amounts charged by equivalent APR on a $100 loan,” as noted in a guest editorial in the St. Louis Post-Dispatch by Alderman Cara Spencer (D-20thWard).

125 miles west along Interstate 70, Columbia (home of the flagship campus of the University of Missouri) has also attempted to institute local regulations. In June of 2017, the Columbia City Council began drafting a bill calling for heavier regulations on payday loan companies in the city.

Current regulations in Columbia only call for payday loan businesses to have a regular business license for $140 per year. In an article for the Columbia Missourian, Columbia Mayor Brian Treece acknowledged that “They fill a need that is not currently met,” such as helping people who are living paycheck to paycheck cover unexpected home or auto repair costs.

But since announcing that they would be looking into drafting regulations, there has been no discernible movement forward in Columbia on the legislation.

Whether the bill proposed by Helms will have the political juice to pass – and whether the proposed regulations will strike the desired balance between what consumer advocates want and what industry representatives maintain is needed for them to stay in business – remains to be seen. The latter are currently reviewing the bill and have not taken a public position on the legislation.

For more information about payday lending in Missouri, check out these related pages and articles from OppLoans: