February 7, 2007
Jefferson City, Mo. — Attorney General Jay Nixon has sent a letter to members of the General Assembly, asking them to pass legislation on payday loans to protect Missouri families. In his call for reform of laws regulating the industry, Nixon cites a recent report showing that payday loan businesses in Missouri charged an average annual percentage rate of 422 percent.
The biennial report, issued by the Missouri Division of Finance on Jan. 17, also showed that the number of loans continues to rise in Missouri ---- approximately 2.8 million loans for the one-year period that ended Sept. 30, 2006, an increase of 11 percent over the last report issued in 2005. Missourians borrowed more than $787 million from payday lenders in only one year, Nixon said. There are now 1,545 licensed payday loan businesses, an increase of 347 from the previous report, issued in 2005. In addition, a study by the Center for Responsible Lending showed that Missourians paid $317 million in fees and interest on payday loans in 2005, second only to California nationally.
“The payday loan industry continues to explode in Missouri, but it is doing so at the expense of desperate Missourians who are so cash-strapped that they have serious problems in paying their rent and utilities or purchasing food,” Nixon said. “I have called for reform of this industry in Missouri for years, which we need now more than ever.”
Nixon was also joined by those who advocate for the poor in society in calling for the legislation, including Larry Weber, Executive Director of the Missouri Catholic Conference.
“Many people in financial straits are entrapped by payday lenders before seeking financial assistance from Catholic Charities and other social service agencies,” Weber said. “Unfortunately, by the time their debts compound many times their original amount because of payday loans' prodigious interest rates, it becomes much more difficult to help these people meet their medical, utility or basic living expenses.”
Nixon noted that while eight neighboring states have strict limits on the interest rates and forbid renewals, Missouri has no real limit on interest charged and allows up to six renewals - effectively allowing payday operators to charge interest rates of up to 1,950 APR. Nixon is supporting legislation this session sponsored by Senator Rita Days and Reps. John Burnett and James Whorton, that would:
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.
“It is our responsibility to take care of our most vulnerable citizens,” said Sen. Days. “We do not need people to prey on our citizens and that is the purpose of this bill.”
“Consumers who take out payday loans can easily get themselves in a hole they can never dig out of, and our lack of laws to protect consumers makes the situation worse,” Nixon said. “Reform in regulating this industry is the only way we can provide real protection.”