If 400% interest is too high, then vote yes to cap the rate.
Missouri law allows rates as high as 400% and higher on payday loans, car title loans, and other consumer installment loans. For example, payday lenders typically charge 444% interest rates and higher. These predatory loans carrying triple-digit interest rates create a long-term cycle of debt, exploiting a family’s budget crisis, not solving it.
There are more of these predatory lenders in than McDonald’s in Missouri. They saturate our urban centers and surround our rural small town squares. A report by the St. Louis Better Business Bureau found payday lenders setting up shop in nursing homes, targeting the hardworking caretakers of our elders.
These payday, car title, and other high cost lenders drain millions of dollars in predatory fees annually from our communities. Missouri loses $317 million annually in fees in payday loan fees alone. That’s a lot of money that could be spent investing in our neighborhoods, building savings accounts, meeting basic needs, and rebooting our economy.
Lenders’ high rates create a spiraling cycle of debt, where families pay fees upon fees upon fees. At these rates, a typical payday borrower will pay over $700 for a $300 loan. This happens with the other lenders too, such as where an installment lender charged a disabled woman $1,000 for her $300 loan.
Where do these fees go? Mostly to out-of-state predatory lenders, who send that money right back to Missouri legislators who protect predatory lenders’ ability to charge 400% interest rates. Missouri’s legislature has failed to act so it is time for Missouri voters to make our voices and values heard.
It’s time for voters to say yes to end this predatory lending.
This is exactly what the ballot will do by limiting the rates to 36% annually - a reasonable, proven approach to halting pervasive abusive lending for small dollar loans. This restores a responsible lending landscape for Missouri, just like it’s had for most of its history and just like what exists in other states. It ends the state’s role as a beacon for the highest cost loans in the country.
Capping the rate at 36% ends the debt trap, puts money back into families’ pockets, and protects local resources so that we can begin the important work of helping our communities recover from the economic recession.
Is 400% to High? Yes, it is.
- Center for Responsible Lending. (2007). Springing the debt trap: Rate caps are only proven payday lending reform. Retrieved May 5, 2009, http://www.responsiblelending.org/payday-lending/research-analysis/springing-the-debt-trap.html.
- Fox, J. A., & Perini, A. (2004). Internet payday lending: How high-priced lenders use the internet to mire borrowers in debt and evade state consumer protections. Consumer Federation of America, http://consumerfed.org/pdfs/Internet_Payday_Lending113004.PDF
- Graves, S. M. (2003). Landscapes of predation, landscapes of neglect: A location analysis of payday lenders and banks. The Professional Geographer, 55, 303-317.
- Hill, R. C., & Kozup, J. C. (2007). Consumer experiences with predatory lending practices. Journal of Consumer Affairs, 41, 29-46. http://mucenter.missouri.edu/Paydaylendingmar2011.pdf
- Missouri attorney general Web site, Opinion No. 98-99, http://ago.mo.gov/opinions/1999/98-99.htm.
- Missouri Division of Finance. (2011). Report to General Assembly pursuant to section 408.506 RSMo. Retrieved February 10, 2011, http://finance.mo.gov/consumercredit/documents/2011PaydayLenderSurvey.pdf
- Still, M. (2009, March 4). Put a collar on predatory lenders. Columbia Daily Tribune, Retrieved, http://www.columbiatribune.com/news/2009/mar/08/put-collar-predatory-lenders/.
- Woodstock Institute. (2006). Hunting down the payday loan customer: The debt collection practices of two payday loan companies. Retrieved May 2, 2009, http://www.woodstockinst.org/programs/consumer-lending/