State senator calls for changes to Missouri laws on payday loan
Monday, February 6, 2012
Missourians who take out payday loans could get more time to pay them off, under legislation put forth by a state senator.
Payday loans are unsecured loans of $500 or less. Current law says that that they must be paid off in 31 days. Sen. John Lamping, R-St. Louis County, told a Senate committee Monday that people should get at least 90 days to pay those loans. His legislation bill would make it illegal for payday lenders to “rollover,” or extend loans beyond 90 days. It also would require lenders to enter customers’ names in a state database to ensure a single customer does not take out more than one loan at a time.
Lamping’s legislation would not set limits on interest rates charged on the loans. A proposed ballot measure that could go before voters this year would limit the interest rate to 36 percent.
Lamping said Monday that such a cap would make it impossible for payday loan companies to remain profitable, citing other states in which interest rates are set by law.
“For the most part, the payday loan industry has mostly left those states,” he said. “The industry doesn’t exist in those places.”
Lamping said his bill is a compromise that would make changes while allowing lenders to make a profit.
Some criticized Lamping’s proposal Monday, arguing it could force consumers to stay in debt longer, even if they were able to pay their loan quicker.
Gerri Guzman, the executive director of the Washington-based Consumer Rights Coalition, said the tracking database would invade customers’ privacy and could encourage them to use illicit sources for short-term cash.
“Consumers should not be punished for having tough times,” she said. “They should not be trapped or made to feel like criminals.”