Springfield, MO, City Council Considers New Rules for Payday Lenders

Inside Subprime: July 17, 2018

By Lindsay Frankel

The Springfield City Council’s Finance and Administration Committee has listened to advocates for payday loan reform and is considering establishing an ordinance that would gave nonprofits more exposure to payday loan borrowers. A similar ordinance has worked well in St. Louis for more than a year, according to alderman Cara Spencer, who spoke at the council’s meeting.

The St. Louis ordinance requires lenders to make clear, in easy-to-understand terms, what it will cost over time for a borrower to take out a $100 payday loan. Payday lenders in St. Louis must also make available a list of alternative loans and other services provided by nonprofits for financially desperate families.

“This gives an opportunity for those nonprofits to have more face time with the consumer at the time they are taking out a loan,” Spencer said. “Most people that are taking out loans in Missouri, take out multiples. They might not choose to go somewhere else at that transaction moment, but they know there are alternatives for the next time they need access to cash.”

In order to cover the cost of inspections to make sure signs are clearly posted, the city charges payday lenders a $5,000 annual fee. Any money leftover from the fees goes to a program that assists low-income families with home repairs.

Kathy Lutz, a Springfield woman whose family incurred financial harm from payday loans, also spoke at the meeting. Lutz originally took out a payday loan in 2014 to help cover her husband’s travel costs associated with her heart surgery in St. Louis. Her family ended up in a debt trap that lasted more than two years, during which time she received phone calls and unexpected visits from the lender looking to collect. With help from the Northwest Project and CU Community Credit Union’s Fresh Start Loan program, Lutz’s family was eventually able to break free from debt.

The committee also heard from Mark Struckhoff of the Council of Churches of the Ozarks. Struckhoff noted that “There is no social justice issue that unifies the faith community more than payday loan reform.” He added, “I’m really here to just encourage you to summon your courage to give this ordinance a chance,” explaining the harm payday loans impose on low-income families. “It’s robbery, frankly, that is reverse Robin-Hood style. It’s stealing from the poor to give to the rich.”

Councilman Richard Ollis noted that he would like to hear the opinions of representatives from the payday lending industry in future meetings before deciding to move forward with the ordinance. However, the committee agreed to continue discussing payday loan reform, and city attorney Rhonda Lewsader was asked to write a draft of the ordinance, modeled after the St. Louis ordinance, before the next committee meeting.

Payday loans in Missouri cost borrowers an average annual interest rate of 455 percent, according to Pew Charitable Trusts. While the Springfield City Council can’t do anything to limit interest rates, since this responsibility is left to Missouri legislators, they can help low-income borrowers in Springfield to access alternatives and require lenders to provide clear information so that families can knowledgeably avoid these risky products whenever possible.

To learn more about payday loans in the United States, check out these related pages and articles from OppLoans:

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