(Jefferson City) (AP) – Missouri lawmakers gave final approval to legislation Thursday that would eliminate renewals on small, unsecured loans and would lower 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. The House passed the same measure earlier this week.
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 from 14 to 31 days.
The legislation sent to the governor’s desk would end loan renewals and cap the amount of fees and interests rates lenders can charge 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 that more needs to be done to keep borrowers from taking out loans they cannot repay.
“I see this bill as providing some greater consumer protection,” said Sen. Scott Sifton, D-St. Louis. “I don’t see it as necessarily solving all the problems that can arise with one borrower going to multiple vendors.”
Others had a clearer view. Sen. John Lamping, R-Ladue, said the bill wasn’t reform and that it 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.