Missouri lawmakers gave final approval to legislation Thursday that would eliminate renewals on small, unsecured loans and would reduce the amount of fees and interest lenders can charge.
The Senate voted 26-4 to send Gov. Jay Nixon the changes to the payday loan industry.
Borrowers in Missouri can renew a payday loan up to six times under current law and can face interest rates as high as 75 percent of the loan’s original amount. Payday loans can be up to $500 and last four to 31 days.
The new legislation would end renewals and cap the amount of fees and interest rates at 35 percent.
Supporters contend the measure would protect consumers from getting into a debt trap. It would require lenders to post in their lobby the amount of fees and interest charged per $100 loaned, and the option for an extended payment plan authorized under the bill. Borrowers who take advantage of that option before the loan’s maturity would not face additional fees or interest.
Many lawmakers had mixed feelings about the legislation. Some said it was a good first step but more needs to be done to keep borrowers from taking out loans they cannot repay.
“I don’t see it as necessarily solving all the problems that can arise with one borrower going to multiple vendors,” said Sen. Scott Sifton, a Democrat from St. Louis.
Others had a stronger view. Sen. John Lamping, a Ladue Republican, said the bill wasn’t reform and was driven by the payday loan industry.
The Missouri Division of Finance estimates that in 2012, 2.34 million loans were issued with an average value of $306 at an average annualized interest rate of 455 percent.