SS SCS SB 884 -- PAYDAY LOANS

This bill applies to unsecured loans for $500 or less made for
from 14 to 31 days, often called payday loans.

The bill 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, but 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.

Receiving a payday loan on the basis of a check for which
sufficient funds are not present at the time of writing does not
constitute the crime of passing a bad check 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 bill will not be
enforceable, and 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.

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