Psst, Missouri legislators. Your arrogance is showing.
One day it’s a group of state senators haughtily declaring they don’t want to be bothered with further talk about Medicaid expansion. (Good luck with that.) Another day it’s a couple of House members berating a pastor who visited the Capitol to correctly warn that a bill purporting to regulate payday lending would instead lead to more and larger debt traps.
Here’s the background: The Missouri Senate has passed a bill that is a gift to the payday loan industry dressed up as a “reform” measure. A slightly altered version is moving through the House.
The main provision bans lenders from renewing or extending loans if consumers haven’t paid off the original debt in full. That sounds like a sensible regulation, but it’s easily circumvented by allowing a borrower to pay off a loan and immediately take out another. Or, the borrower could go to another storefront lender. In parts of Kansas City, you wouldn’t even have to leave the block.
Recent research by the Consumer Financial Protection Bureau has found that, in states that prohibit rollovers, three of four customers take out an additional payday loan within two weeks of the first.
In exchange for imposing a few meaningless regulations, the Missouri General Assembly would give the payday loan industry a green light to continue loading up loans with high interest rates and fees.
A provision in the House bill to lower the total amount of interest and fees on a loan from 75 percent to 35 percent is not a legitimate cap on annual interest rates, as consumer advocates have been seeking. A borrower could still rack up an annual percentage rate of 912 percent on a $350 loan. That’s exploitation and would leave Missouri’s status as a haven for payday lenders unchanged.
Michelle Scott Huffman, a Jefferson City pastor representing a coalition called Missouri Faith Voices, tried to point out the bill’s flaws when she testified before the House Financial Services Committee. She didn’t get far.
Rep. Kevin Engler, a Republican from Farmington, seemed frustrated that Huffman couldn’t offer a solution other than a serious cap on annual interest rates so that people won’t fall into a debt trap. Without a payday loan shop on the corner, people would have no choice but to go to “Vito on the street,” he said, referring to a mythical loan shark. “Have you ever seen someone’s legs broken for not paying?” he asked.
Engler’s stance is one of willful ignorance. At least 15 states prohibit high-cost payday lending, and people in a pinch somehow manage without a visit to Vito. Besides, even loan sharks don’t charge 444 percent, the annual percentage rate on an average payday loan in Missouri.
In a sarcasm-laced, if confusing, line of inquiry, Wanda Brown, a Republican from Cole Camp, accused Huffman of encouraging people to be fiscally irresponsible by trying to protect them from soaring debt.
“I’m sorely disappointed that you come here to complain and you have no solutions,” she lectured. “If I send people to you, will you pay their bills? How about telling them, ‘You have to be responsible for what you do?”
Brown’s remarks make no sense. The payday loan industry cannot survive if its consumers demonstrate “personal responsibility” and quickly pay off their loans. It relies on repeat customers taking on expanding levels of debt. By championing a bill that is being pushed by payday loan lobbyists, Brown herself is promoting fiscal irresponsibility.
No surprise, the committee unanimously moved the bill along to the full House.
Some legislators seem increasingly bothered by faith groups and others who come to the Capitol to speak on behalf of Missourians. Huffman, simply by her appearance, seemed to get under lawmaker’s skins. It’s not exactly a victory for consumer advocates, but it’s something.