JEFFERSON CITY, Mo. (AP) - Critics are challenging a proposed Missouri ballot measure that attempts to limit costs for borrowers who use payday loans and other small loans.
Opponents of the measure filed a lawsuit over the proposal in the state Capitol's home of Cole County. The suit challenges the cost estimate and the summary that would appear on the ballot before voters next year.
The proposed ballot measure seeks to cap the interest, fees and charges for payday, car title and installment loans at 36 percent. Critics of payday lending have said the annual interest rates for such loans can exceed 400 percent.
Supporters of the ballot measure said they plan to start collecting signatures this week to get it on the 2012 ballot. To qualify for the ballot, supporters must collect signatures from registered voters equal to 5 percent of the votes cast in the 2008 governor's election from six of Missouri's nine congressional districts.
A lawsuit challenging the proposed ballot measure contends the ballot summary is inadequate and unfair because it does not mention that the costs for many types of loans would be capped at 36 percent, and that the restrictions would apply broadly to consumer and small-term loans. Critics also contend that the ballot summary wrongly implies that Missouri does not already have limits on the interest that can be charged for loans.
The challenge also focuses on the cost estimate. It contends that substantial costs to the lending industry were not included.
"The counts brought forward in our lawsuit are heavily substantiated," said Chuck Hatfield, an attorney involved with the legal challenge. "We feel confident our well researched claims will be ruled on in our favor."
Attorney Todd Graves, who also is involved with the legal challenge, said those who start collecting signatures would be doing so at their own risk because they expect the signatures to be discarded if the lawsuit is successful and the summary and cost estimates must be rewritten.
A group of community and religious leaders have proposed the ballot measure. Jim Bryan, treasurer for Missourians for Responsible Lending, said the legal challenge would not deter supporters.
"Those who aggressively market loans at an annual interest rate of 445 percent will aggressively litigate to defend the practice that preys on vulnerable working Missourians," Bryan said. "Missourians believe 445 percent APR is too high."