St. Louis Post-Dispatch
The Missouri Senate has endorsed a bill that would allow payday loan borrowers to receive extended payment plans. The measure, sponsored by Sen. Mike Cunningham (R-Rogersville), is meant to help keep consumers from getting trapped in debt. Some senators say the proposal does not go far enough but is a step in the right direction. The bill will go up for another vote in the Senate before moving to the House.
Under SB 694, payday lenders would have to display offers of repayment plans over 60 or 120 days with due dates coinciding with expected paychecks. The lenders could not charge additional interest or fees during that time, and borrowers could only get one of these deals per year. Renewals or rollovers of payday loans also would be banned.
Current Missouri law caps interest and fees on a loan at 75 percent of the original principal. Payday loans can last for 14-31 days. Lenders are allowed to charge $75 on a $100 loan over 14 days, which amounts to an annual interest rate of more than 1,950 percent. The average interest rate of payday loans in Missouri was 454 percent from 2011 to 2012, the state’s finance division reports. SB 694 would remove the $75 per $100 dollar cap, as the renewal ban and extended payment plan would render it unnecessary. Current law also allows short-term loans to be renewed or “rolled over” up to six times, with interest continuing to accumulate.
Some observers wonder how effective the legislation would be. According to the Center for Responsible Lending, few consumers take advantage of extended repayment plans that are required by law. Only 15 percent of eligible loans in Washington state were repaid under the extended plan mandated there, for example.