Imagine you work at a minimum wage job and have little to no savings. Your spouse has recently lost her job, your car just broke down and the rent is due. You have no money to fix your car (or pay for public transport, if it is available) and also pay the rent until your next pay day. Where do you go for the cash you need? For many low-income Missourians, the unfortunate answer is: to a payday lender.

Needing a “little” cash in a hurry when you lack financial resources causes low income working people to turn to payday lenders who provide loans with few questions asked and no check of creditworthiness. For example, a borrower will give the lender a post dated check that the lender can cash in two weeks if the borrower fails to pay off the loan. An emergency loan of up to $500 can quickly escalate into thousands owed. The payday lenders will charge $15 dollars per every $100 owed. The equivalent Annual Percentage Rate (APR) for most grows to over 400 percent but actually can reach an astounding 1,950 per cent.

Missouri, unlike surrounding states, allows payday loan companies to take full advantage of the most financially vulnerable populations-those in need of emergency cash. While the State of Missouri has the distinction of ranking at or near the bottom on a variety of public policy indicators, there is one indicator in which Missouri unfortunately ranks near the top. Missouri has among the most payday lending outlets of any state in the union. For many low-income individuals, including individuals living on Social Security or disability payments, who lack access to traditional bank accounts (either because of lack of funds or because some banks will not locate in low-income neighborhoods), reliance on payday lenders is sometimes the only way to pay outstanding bills.

Missouri has done almost nothing to regulate or control the payday lending industry. This year, JCRC endorsed a bill introduced by Rep. Mary Still (D-Columbia) which would have gone a long way toward redressing this situation. HB 132 would implement many positive changes as to how payday loans are handled in our state. Among other things, the bill would:

• Limit interest rates to a simple annual rate not to exceed 36 percent, which by Federal law is the maximum interest rate that can be charged to military families. (Currently the average interest rate for a payday loan in Missouri is 445 APR.)

• Prohibit repeated renewals of loans

• Prohibit a lender from making a loan to a person who currently has a payday loan or from lending to a person within two weeks of that person paying or otherwise satisfying in full a previous payday loan

• Prohibit these types of loans from being solicited, advertised or being provided on the premises of nursing homes, assisted living, intermediate care or skilled nursing facilities

Unfortunately, at a hearing last month concerning HB 132 and a separate payday lending bill, HB 656, the House Financial Institutions Committee voted down HB 132 and voted in favor of HB 656. HB 656 caps the interest rate at 1,564 percent (as opposed to 36 percent in Rep. Still’s bill). With the average actual rate at 445 percent, a cap more than three times that rate would only marginally help those low-income and fixed-income individuals most likely to take out these loans. In addition, HB 656 allows lenders to decide whether to extend loan periods and reduce the principals with each payment. However, Missouri courts already have held that such extensions and reductions are mandatory. The question then becomes whether to support a bill that may only slightly modify the interest cap.

JCRC urges you to take these steps to raise your voice in support of low-income Missourians and against the usurious practices of payday lenders in the state. First, call Missouri House Speaker Steve Tilley at 573-751-1488 and your state legislators and ask them to resurrect HB 132, the bill that would create the most meaningful reform. Second, attend an important upcoming event in St. Louis to learn more about payday lending and what you can do to stop abuses in the industry.

The event, “Payday Loans: Payback Forever” is sponsored by the Consumers Council of Missouri and the Missouri Association for Social Welfare and features speakers Jean Fox, Director of Financial Services for the Consumer Federation of America, Rep. Mary Still, State Rep. of the 25th District, and Jackie Hutchison of the Human Development Corporation. This event will be at noon Friday, April 15 at The Highlands in Forest Park, 5163 Clayton Road. For more information about the event and to RSVP, contact 573-690-6772 or [email protected].

Commentary

Betty Renee Marver is a JCRC Advocacy Committee member and Vice Chair of the St. Louis Chapter of the Missouri Association for Social Welfare board and a board member of the Consumers Council of Missouri. Gail Wechsler is Director of Domestic Issues/Social Justice at the JCRC.