Attorney general seeking reform of payday lenders

Melissa Dunson
The Joplin Globe

Divorce. Depression. Suicide.

On a daily basis, Mike Cherry, president and chief executive officer of Consumer Credit Counseling Services in Joplin, sees the impact debt has on people. He also is applauding Missouri Attorney General Jay Nixon’s call to reform the payday-loan industry.

Cherry says his office helps 3,000 people a month deal with overwhelming debt. In 2006, his staff provided bankruptcy counseling for 10,750 people. More than half owed on at least one payday loan.

But some payday lenders think they’re unfairly characterized as loan sharks and crooks while other lending practices have been ignored.

Connie Bridges, manager of the Payday Money Store in Neosho, says the attorney general needs to take a look at banking and credit-card companies.

“I had a lady in here who was overdrawn by $1.73 and the bank penalized her $25,” Bridges says. “Some of them charge $7 a day on top of that for each day overdrawn. Now you tell me, who’s the crook?”

1,950 percent

Nixon recently sent a letter to the Missouri General Assembly asking legislators to support measures to limit the interest and other fees charged on a loan to about 36 percent, prohibit renewals of loans and clarify that limitations apply to both licensed and unlicensed lenders. The legislation would also give Nixon’s office jurisdiction to issue cease-and-desist orders against violating lenders and allow him to sue for injunctions, restitution, rescission of loan contracts and civil penalties.

Nixon points to a recent report from the Missouri Division of Finance that indicated there are 60 percent more Missouri payday-loan businesses now than four years ago and 870,000 more payday loans have been made. More people are borrowing more money at higher interests rates resulting in nearly 60,000 more defaulted loans.

“Missourians continue to fall into the debt trap set and sprung by payday lenders who promise a quick fix to a financial pinch, but instead inflict greater harm through exorbitant fees and onerous terms,” Nixon writes in a letter to legislators.

John Fougere, spokesman for Nixon, says the attorney general is just asking lawmakers to give Missourians the same protections afforded residents of the eight states surrounding Missouri. None of Missouri’s neighbors allows lenders to renew payday loans, but Missouri permits six renewals, allowing payday lenders to charge up to a 1,950 annual percentage rate. Also, none of the surrounding states allows a higher percentage rate/fee on loans and only Nebraska and Oklahoma allow a greater maximum term, Fougere said. “Our responsibility is to protect Missouri consumers. We just want what our neighboring states have. The other states have strict limits on things like the APR. We want that for Missouri.”

Click Here to Read Full Article