SS SCS SB 884 -- PAYDAY LOANS

SPONSOR: DePasco (Liese)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Banks and
Financial Institutions by a vote of 18 to 0.

This substitute requires that after the first renewal of a payday
loan, the borrower must reduce the principal amount of the loan
by not less than 5% of the original amount of the loan until it
is paid in full.  No loan can be renewed more than six times.

A lender may charge any simple interest or fees agreed to by the
parties to the loan.  However, no borrower may be required to pay
a total amount of interest and fees in excess of 75% of the
initial loan amount on any single loan and all renewals.

All original or renewed payday loans must be for a term of at
least 14 days, but no more than 31 days.

A loan is considered completed if the lender presents the check
for payment or the consumer redeems the check by paying the full
amount to the lender.  Once a loan is completed, the consumer can
enter into a new loan with the lender.

With limited exceptions, a loan cannot be repaid from the
proceeds of another loan made by the same lender.  A lender
cannot have more than $500 in loans to the same borrower at any
one time.  A lender complies with this requirement if the lender
receives a signed statement from the consumer in which the
consumer attests to the fact that the consumer does not have more
than $500 in loans from that lender.

The substitute provides that a person does not commit the crime
of passing a bad check if the person receives a payday loan,
unless the person closes the checking account on which the loan
was made before the loan is paid back or the person stops payment
on the check.  A return check fee may be charged where cash is
advanced in exchange for a personal check.

Any loan that charges fees in violation of the substitute will
not be enforceable.  The substitute provides that lenders cannot
use certain devices to avoid its provisions.

The Division of Finance is required to make a report to the
General Assembly on January 1, 2003, and every two years
thereafter that contains information about the number of payday
loan licenses issued, the number of loans issued by licensees,
the average face value of the loans, the average number of times
that the loans are renewed, the default rate for the loans, the
number and nature of complaints made to the division, the average
interest and fees charged, and a comparison of the interest and
fees charged in this state and adjoining states.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that the substitute is a compromise
that addresses the needs of consumers and those concerned with
abuse yet does not put companies out of business.

Testifying for the bill were Senator Kenney; United Payday
Lenders of Missouri; Missouri Catholic Conference; Missouri
Impact; QC Financial; Community Financial Association of America;
Missouri AFL-CIO; and Kansas City Church Community Organization.

OPPONENTS:  There was no opposition voiced to the committee.

Mark Pioli, Legislative Analyst

Missouri House of Representatives
Last Updated October 11, 2002 at 9:04 am