The Missouri House endorsed legislation Wednesday lowering limits on how much payday lenders can charge customers.
In a 99-57 vote largely along party lines, House members backed legislation that would cap total interest on such loans at 60 percent of the loan amount, rather than the current cap of 75 percent. The legislation would allow lenders to “roll over” a customer’s loan three times instead of the current six.
Democrats say the measure doesn’t go far enough in lowering interest rates or allowing customers enough time to pay off their loans. The House must vote on the bill once more before it goes to the Senate.
Sponsoring Rep. Ellen Brandom, R-Sikeston, said payday loans help low-income people because it allows them to obtain funds on short notice without a credit application.
“If you do not have credit and do not have security, you really have no business to go to other than a payday loan,” she said. “I think this bill protects the consumer, but at the time, it doesn’t put the payday loan companies out of business.”
The bill endorsed Wednesday is the product of an ad hoc committee appointed by House Speaker Steven Tilley to address the issue. Before Wednesday’s vote, Brandom emphasized that the committee had included both Republicans and Democrats.
Left off of the committee was Rep. Mary Still, D-Columbia, who has sponsored legislation related to the payday loan industry for several years. An outspoken critic of the payday loan industry, she has even held unofficial legislative hearings about changes that should be made to the industry.
Still said the limits on interest rates should have been limited to a 36 percent annual percentage rate.
Still sponsored legislation this session to do that. Her bill also would have required that customers be given 90 days to repay the loans and would have included a two-week waiting period between paying off one loan and taking out another.
That measure was voted down by the same committee that approved Brandom’s bill.
Still also took issue with a part of Brandom’s bill that changes when loans can be “rolled over” or renewed.
Current law says the lender must roll over the loan up to six times if the customer requests it in writing. Brandom’s bill would allow the lender to choose whether the loan is rolled over and would limit the number of renewals to three. Still said the change means lenders could choose to call the loan if a customer falls on hard times, such as a job loss, compounding the customer’s financial problems.
“This is real change and unfortunately it’s not reform,” Still said Wednesday. “It takes away all of the rights the consumer has and gives them to the industry.”
Some Republicans said lowering the APR to 36 percent would force payday loan companies out of business, because they would not be able to profit on loans. They said the resulting job losses in the industry would hurt the state’s economy.
The two-day debate, which started Tuesday, was contentious at times. Still and Rep. Jake Zimmerman, D-St. Louis, both implied that lobbyists for the payday loan industry had influenced Republican support for the legislation. House Speaker Pro Tem Shane Schoeller, R-Willard, admonished them, telling them at one point to “focus on the content of the bill and not (their) opinions.”
Rep. Rory Ellinger, a bankruptcy attorney, said more than one-third of his clients report having trouble paying back payday loans. He said the legislation backed by the House would still allow high interest rates that would be difficult to pay back.
“Payday loans feast on people who have financial difficulties,” said Ellinger, D-University City. “People in the last (financial) gasps go to get payday loans and then aren’t able to pay them off.”
Payday loans bill is HB656.
Still’s payday loan bill is HB132.