Missouri was oh so close to revising its egregious payday loan policies in 2014, but has failed to get much traction on a reform effort since. That year, both the Missouri House and Senate passed a reform bill, but then Gov. Jay Nixon vetoed the bill, saying it didn’t go far enough.
So for another six years, Missourians have suffered under a system that has an average Annual Percentage Rate (APR) of 462%, one of the highest rates in the country.
Current Missouri Law
Current law in Missouri allows individuals to borrow up to $500 for a period between 14 to 31 days. The fee on the loan is $75 per $100 borrowed. So on a $100 loan borrowed for 14 days, the interest rate is 1650%. Borrowers can renew a loan for up to six times, but with each renewal, they’re required to reduce their principal amount by at least 5%.
The policy prohibits a loan from being repaid by a loan from the same lender or their affiliate and limits to $500, the total dollar value of loans a borrower can have from a lender and affiliate. However, the law does nothing to cap how many loans a borrower can have with other lenders or to cap the total amount of payday loans a borrower can have at one time.
The 2014 Reform Miss
The bill that almost passed in 2014 wasn’t without fault, but it would have reflected a significant decrease in interest rate. The bill would have eliminated loan rollovers and capped interest and fees at 35% of the initial loan amount. That rate reflected a significant decrease from the $75 per $100 borrowed that existed then and still exists.
Lenders would also have been required to "conspicuously post" in their lobby the amount of fees and interest charged per $100 loaned. In addition, once a year, borrowers would be allowed to enroll in a no-penalty extended payment plan with an individual lender.
Former Gov. Jay Nixon, a Democrat, vetoed the bill because it did not go far enough and claimed that the bill appeared to him to "be a part of a coordinated effort by the payday loan industry to avoid more meaningful reform."
Some of the revisions that Nixon found missing were: nothing that controlled the number of loans an individual could have at one time, or to cap the total dollar value of payday loans a borrower could have at one time, and then nothing to test a borrower’s ability to repay the loan.
A Little Noise in 2018
In 2018, the Missouri House Subcommittee on Short Term Finance held a hearing on payday loan reform and a bill was introduced that closely mirrored the 2014 bill. After the hearing was held, the committee members decided not to take action, but to wait and see what was to become of the payday lending policies being proposed on the federal level by the Consumer Financial Protection Board (CFPB).
Under the Obama administration, the CFPB began work on some borrower-friendly payday loan policies. Obama left office before the proposals were implemented. However, work continued on the measures. Just days ahead of the date that had been set for the revised policies to go into effect, the Trump Administration put the plans on hold for review and reintroduced the revisions a few months later minus many of the consumer protection supporters had hoped for.