Missouri bill could stop city plans for payday lender fees
After years of debate, Springfield City Council voted on Monday to impose new regulations on payday lenders whose high interest rates can create a “debt trap” for desperate borrowers.
Among the highlights was a plan to impose an annual license fee of $ 5,000 submitted for voter approval in August, which would be used to enforce city rules, help those in debt and provide alternatives. short-term loans.
But Republican lawmakers in Jefferson City may have other ideas.
In action earlier Monday, Representative Curtis Trent, R-Springfield, added wording to a banking bill that lawyers, attorneys and city officials say would protect a number of payday lenders from charges targeting their sector.
The bill passed the House that day and passed through the Senate the next day. All Greene County lawmakers in attendance voted in favor, with the exception of Parliamentary Minority Leader Crystal Quade, D-Springfield. It is now on Governor Mike Parson’s desk for final approval.
Trent’s language specifically says that local governments are not allowed to charge fees to “traditional installment lenders” if the fees are not charged to other state-regulated financial institutions, including chartered banks.
Trent and other Republican lawmakers have said it has nothing to do with payday lenders, arguing that âtraditional installment lendersâ are different.
âNothing prevents the city from putting an order on their payday lenders,â Trent said in an interview Thursday. “It was not the intention to stop the city ordinance and I don’t expect that to be the effect.”
But John Miller, a retired Kansas City lawyer who argued for a similar order in suburban Liberty, pointed out that many payday lenders are also installment lenders.
âThis is how they try to get around the ordinance in Springfield, the ordinance in Liberty,â Miller said. âThey describe it as, ‘We’re a separate type of business,’ but that’s not how anyone looking at reality would see it.”
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Indeed, status registers indicate that more than half of the payday lending establishments in Springfield are also authorized to offer installment loans.
Springfield City Councilor Craig Hosmer, a lawyer and former lawmaker, said Trent’s measure would give those payday lenders the ability to challenge the city’s proposed fees in court.
âAnd that’s exactly what they want to do,â Hosmer said. “They want to protect this industry.”
And while Trent is right, Hosmer said, his bill also includes a powerful push for cities to turn around. Another provision states that if lenders sue cities for their rules and win, they will be entitled to the costs they incur, including attorney fees.
Hosmer was concerned that the legislation would also encourage lenders still only offering payday loans to diversify in an attempt to exempt themselves from fees.
Brian Fogle, CEO of the Community Foundation of the Ozarks and co-chair of a city committee appointed to study payday loans, said it would make sense given recent trends.
âA lot of these payday lenders are turning to this type of product,â he said.
Unlike payday loans, which have to be less than $ 500 and are supposed to be paid off in a matter of weeks, installment loans can be larger and are repaid over four months or more. However, they can still carry triple-digit annual interest and create similar problems for borrowers.
He admitted that expanding these offers could have a positive effect for consumers, as loans are repaid gradually.
But he said lenders “are still charging very, very predatory rates.”
Susan Schmalzbauer, a Faith Voices of Southwest Missouri organizer who has advocated for the city’s overhaul for years, said it was all an attack on local control that looks like “a big gift to predatory lenders at the expense of cities. “.
She also noted that Trent’s measure was passed although there had never been a public hearing where citizens could have their say.
âPutting this into the bill is really a slap in the face for voters across the state,â she said.
Cara Spencer, a St. Louis alderman who led an effort to lower that city’s $ 5,000 license fee, echoed those concerns. (Kansas City’s annual fee is $ 1,000.)
“They slipped a provision into an omnibus bill that was not even discussed or recognized by either house,” she said. “It’s a crazy way to add provisions that will have implications across our state.”
Quade, the House Minority Leader for Springfield, said the move was also a bad idea during a downturn fueled by a pandemic that has seen hundreds of thousands of Missourians file for unemployment.
âPeople use the payday loan industry when they are desperate and obviously there are a lot of them right now,â she said. “It will be harmful.”
The legislation is Senate Bill 599.
Austin Huguelet is the News-Leader political reporter. Do you have something he should know? Have a question? Call him at 417-403-8096 or email him at [email protected] You can also support local journalism on News-Leader.com/subscribe.