Payday Loan Industry on Defense
Payday Loan Industry on Defense
Lawmakers Host Field Hearing in Hannibal
State Senator Wes Shoemyer (D-Clarence), State Representative Rachel Bringer (D-Palmyra), State Representative Terry Witte (D-Vandalia), and State Representative Mary Still (D-Columbia) heard testimony at a district legislative field hearing on payday loan reform held Thursday, February 4. Senator Shoemyer is sponsoring a bill on payday loans. Senate Bill 811 is a companion bill to House Bill 1508, sponsored by State Representative Mary Still of Columbia.
A crowd of over 100 people attended the hearing at the Marion County Courthouse in Hannibal to hear expert and personal testimony of reform advocates from throughout the State. Those presenting included payday loan consumers, and representatives of consumer advocacy groups. The payday lending industry was represented at the hearings by Tom Linafelt of QC Holdings, Overland Park, Kansas.
Financial educators Brenda Procter and Wendy Brumbaugh testified on their experiences working with consumers saddled with payday loans, which they have no prospect of paying off. Hannibal attorney and bankruptcy trustee Fred Cruse described overworked and overcrowded bankruptcy courts. Cruse blamed other social ills on payday lending, saying “Exorbitant interest rates force people to do bad things” and “it seems like the people who can least afford it are being charged the most.” Hannibal attorney Branson L. Wood III cited “the wisdom of the ages” saying “our ancestors knew the social cost of excessive interest was too great” and calling for legislators to “protect Missouri from the effects of payday loans.”
Tom Linafelt defended the industry. His firm, QC Holdings of Overland Park, Kansas, “proudly made $138 million in emergency loans” to what a he termed a “silent majority” of Missourians who don't like to discuss their borrowing. Linafelt objected to the use of APR (annual percentage rate) as a standard for his product. Representative Mary Still noted that APR is the standard sanctioned by Federal law. Tom Linafelt threatened Missouri with the loss of “thousands of jobs” if new regulations were adopted because high expenses keep payday lending from being very profitable despite the high interest rates they charge.
Donna Evans of the United Credit Union testified that at least nine credit unions were now offering small short term loans in an effort help members who have fallen behind with payday lending. Evans said her Credit Union had not expected to make money with the project but actually did. The APR on UCU's loan never exceeds 36%, whereas payday loans can charge as much as 1,950%.
Attorney Wood noted that while prosecutors in Marion County will not prosecute post-dated checks, payday lenders still threaten prosecution and can pursue their customers in civil court. Monica Acree described her experience representing herself in a civil suit after her payday lender failed to present her check for timely payment. Former payday loan customer Fenny Dorsey concluded with her story of being threatened with arrest by a payday lender, then fighting back, paying off her loans, and successfully paying off a conventional auto loan she was able to receive with her improved credit.
The reform measures proposed by Shoemyer and Still are modeled after federal legislation sponsored by former U.S. Sen. Jim Talent, a Republican from Missouri, who called for interest rate limits of 36% APR for military families and no rollover of loans. The Missouri Division of Finance reports that Missouri allows six loan rollovers compared to surrounding states, which ban rollovers.
A recent report by the Better Business Bureau of Eastern Missouri and Southern Illinois shows that Missouri allows payday lenders to charge up to 1,950 annual percentage rates on a two-week loan; the highest allowed among the 43 states that have either banned or limited loans. That report also shows that Missouri is the only state to allow payday loans to operate in nursing homes. House Bill 1509 would make it illegal to offer payday loans in nursing homes.
The Hannibal hearing was the third of four hearings scheduled across the state. The fourth will take place in St. Louis, Missouri on February 18, 2010.
Photographs of the hearing are available at the following web address: http://picasaweb.google.com/
“Live tweets” of the event appeared here: http://twitter.com/
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