HCS HB 1501 -- PAYDAY LOANS

SPONSOR:  Liese

COMMITTEE ACTION:  Voted "do pass" by the Committee on Banking by
a vote of 9 to 8.

This substitute applies to unsecured consumer loans of $500 or
less in which cash is advanced with an original term of 30 days
or less and a single payment is anticipated.  The substitute:

(1)  Prohibits charges of more than $30 per $100 of principal for
the first 30 days of the loan, including both the original term
of the loan and any extensions during that 30-day period, and
more than 3% per month of the outstanding balance after the 30th
day of the original loan;

(2)  Prohibits any other charges, including charges for cashing
the loan proceeds if given in check form;

(3)  Prohibits a lender from having more than two loans of this
type outstanding to any borrower at any one time;

(4)  Prohibits loans of this type from being repaid from proceeds
of another loan of this type;

(5)  Allows returned check charges;

(6)  Prohibits enforcement of the provisions of any contract for
payment of money subject to the substitute when the contract is
for payment of money in excess of that allowed by the substitute;

(7)  Applies to any creditor involved in any way in a contract
for payment of money as described in the substitute or any person
or entity that is involved in procuring a loan subject to the
substitute or that accepts a check or other negotiable instrument
drawn on a bank and payable on demand at maturity of the deferred
deposit loan, such as payday loans; and

(8)  Does not supercede any law that specifies a lower rate or
amount of charges.

FISCAL NOTE:  Not available at time of printing.

PROPONENTS:  Supporters say that these businesses tend to put
vulnerable people in a cycle of continued roll-over of debt.  The
annual percentage rate for a loan that continues to be rolled
over would be 391%.  Although there is a need for these
establishments, they should be more tightly regulated.

Testifying for the bill were Representative Boucher; members of
the Kansas City Church Community Organization; Association for
Retarded Citizens of Missouri; Kansas City Catholic Charities;
Greater Kansas City Building and Construction Trades Council;
AARP; Missouri Catholic Conference; Missouri Impact; United
Steelworkers of America District 11; Missouri AFL-CIO;
Carpenters' District Council of Kansas City and St. Louis; and
many individual citizens.

OPPONENTS:  Those who oppose the bill say that adequate
protections were passed last year and that the industry has yet
to see the rules promulgated by the Division of Finance.  The
interest charged is high because the default rate on these loans
is so high.  Some said that the bill would force them to close
their businesses.

Testifying against the bill were Community Financial Service
Association of America; Kingshighway Properties; Heartland Loan
Company; Rainbow Loan Company; United Payday Lenders of Missouri;
CheckMate Financial Services; Paycheck Advance, Inc.; Keller's
Payday Loan; QC Financial Services; Clay Bethune; Lindsey E.
Semon; and Janie Beaird.

Mark Pioli, Legislative Analyst

Missouri House of Representatives
Last Updated October 11, 2002 at 9:01 am