Attorney General's News Release

May 29, 2002

Nixon urges Gov. Holden to veto payday loan bill; says it would allow lenders to charge consumers 1,950% APR

Jefferson City, Mo. — Attorney General Jay Nixon today urged Gov. Bob Holden to veto payday loan legislation passed by the General Assembly. Nixon said that instead of providing actual reform to the payday loan industry, the bill (Senate Substitute for Senate Committee Substitute for Senate Bill 884) gives protection to lenders from consumer protection laws and allows them to charge consumers an annual percentage rate of up to 1,950 percent on loans.

"There is a misconception — based largely on the vague wording of the legislation — that this bill would cap the interest on payday loans at 75 percent APR," Nixon said. "In reality, lenders would be able to charge up to 75 percent every two weeks. With the bill allowing loans to roll over six times, consumers who do not immediately pay off the entire loan will find themselves paying an astronomical amount of interest.

"The General Assembly needs to take another run at payday loan reform next year," Nixon said. "In the meantime, Gov. Holden should protect consumers by vetoing this wolf in sheep's clothing."

Nixon said both the AARP and the Consumer Federation of America also had called for the governor to veto SS/SCS/SB 884, and that AARP Missouri had stated that, if passed, this bill would allow by far the highest fee cap of any payday loan law in the country.

"It's no secret that this is the bill the payday loan industry wanted, because it has little teeth to it," Nixon said. "If this bogus reform is signed into law, it will mean true reform will become that much harder to enact in the future."

Consumers also would continue to be without adequate protection from fraudulent misrepresentations made by payday loan lenders if SS/SCS/SB 884 becomes law, Nixon said. He said payday lenders would remain outside Missouri consumer fraud laws that cover other businesses, including provisions giving the Attorney General direct authority to investigate and prosecute those misrepresentations.

Payday lenders currently are regulated by the Missouri Division of Finance, and the Attorney General can only take action when cases are referred by that division.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Communications Office.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818