Regulatory staff urges no ban for Missouri payday lenders accepting utility payments

The push in Missouri to ban payday lenders from accepting utility bill payments has suffered a setback.

In a report filed this week, the staff of the Missouri Public Service Commission recommended no ban, saying that legal authority to stop the practice was questionable. The report also said no specific evidence was presented that consumers were being harmed.

“Staff recommends it not promulgate or initiate a rule making” said Natelle Dietrich, director of tariff, safety, economic and engineering analysis at the agency, which regulates utilities.

Those pushing for a ban contend that utility customers who fall behind on bills are vulnerable to payday lenders who charge exorbitant interest rates. They blasted the staff report and now hope that a majority of the agency’s five commissioners, who are not required to accept staff recommendations and sometimes don’t, will decide to proceed with a ban.

John Coffman, an attorney for the Consumers Council of Missouri, said the staff was mistaken in believing that state regulatory authority was questionable. After all, he said, it oversees the billing practices of utilities that are authorizing payday lenders to accept payments for them.

“I think they’re off base, and I think the commission will see it the same way,” he said.

Mary Still, a retired state legislator and longtime critic of payday lenders, said she will be disappointed if regulators accept the staff’s recommendation.

“I hope they understand this is very detrimental to working people,” Still said. “Everyone knows this.”

Utilities defend using payday lenders as the best and most convenient option for some customers. And payday loan companies argue that very few utility customers paying their bills also take out a loan.

Most utility customers pay their bill by mail or online. But a small percentage don’t have a bank and have to pay in cash.

KCP&L said 2.6 percent of its customers now use walk-in authorized pay stations, such as grocery and convenience stores. But the utility has an arrangement with eight authorized pay stations in Missouri and one in Kansas that offer check cashing services or payday loans. The utility said they are used because they are the only option in those areas.

The issue has simmered for years in the state. In 2009, the commission staff reviewed the arguments and didn’t recommend that utilities stop using payday lenders. In 2011, regulators said the relationship between the lenders and utilities was a concern, but it wouldn’t seek to ban them. State regulators subsequently said they wanted another review.

This week’s staff report said it was sensitive to concerns about possible abuse by payday lenders, and it did say that pay stations authorized by utilities could arguably be subject to regulation. However, the staff said, it had no specific evidence of harm to consumers, such as complaints to utilities. So why stop a practice that may or may not be a problem in the future?

It also said that payday lenders that are unauthorized pay stations — and there are some not connected to utilities that accept payments and pass them on — are clearly outside the jurisdiction of regulators. They also don’t have authority to address whether payday lenders are predatory.

“Perhaps the greatest single obstacle to regulation by the commission of the use of payday lenders as utility pay stations is the fact that such lenders are engaged in an entirely lawful, even if distasteful, business,” according to the report.

Berta Sailer, co-founder of Operation Breakthrough, a Kansas City social services group, said the staff’s argument about the lack of evidence didn’t make sense. There may not be complaints to utilities, but she has seen what can happen to families in desperate straits who get mired in debt from high-interest loans.

“When you have kids who are cold in the winter, you’ll get a loan you can’t afford,” she said.

This story was originally published August 14, 2014 at 12:01 PM with the headline "Regulatory staff urges no ban for Missouri payday lenders accepting utility payments."