Cat the Rate
Payday loans are out of control in Missouri.
They are taking millions of dollars out of our local economies by targeting the working poor who desperately need help.
For people who have never had to use payday loans before, it's hard to know how bad it's gotten.
If you had a bad credit card, the annual percentage rate (APR) would be 36%.
The average payday loan in Missouri has an APR of 455%.
And the current maximum rate is 1,950%.
A recent study from the Consumer Financial Protection Bureau revealed that 4 out of 5 payday loans aren't able to be paid when due, spiraling borrowers into debt.
There are more payday loan shops in Missouri than there are McDonald's, Starbucks, and Walmarts combined.
Payday lenders prey upon people at their weakest moments. They especially target the disabled and elderly.
The product is designed for people to fail: 90% of payday revenue comes from trapped borrowers.
It's legalized loan sharking. And it's spreading misery in our communities.
But now there's a bill that would make it even worse. SB694 would completely take away limits on what the payday loan industry can charge.
Why is this happening?
In Missouri, there are no limits on campaign contributions. And there are no limits on lobbying. Missouri is the only state in the country with no safeguards on either.
Predictably, the payday loan industry has saturated Jefferson City with cash and lobbying. Predatory lenders have donated more than $1,000,000 to Missouri lawmakers, with another $600,000 spent on wining and dining them. It's created a perverse culture.
Payday lending companies gave $3,000 to one of the top State Senators whose commitee oversees payday loans – true to form, a few days later he introduced SB694, the fake reform bill that is a giveaway to predatory lenders.
The bill bans rollover loans, which is good, but it doesn't address the other procedural tricks lenders can use – like back to back loans. And in exchange for this minor tweak, the payday loan industry is now completely unlimited in what it can charge borrowers.
So last week the House Financial Institutions Committee held a hearing on the reform bill.
The lobbyist for the payday loan industry actually testified in favor of the bill!
A pastor who works with communities affected by payday loans testified against the bill, warning that it doesn't fix the problem.
With who testified for which side alone, does that sound like real reform?
Now which person do you think the state representatives challenged: the pastor with no financial incentive, or the lobbyist for loan sharks?
Legislators can't see the people suffering because there are too many lobbyists in the way.
But the pastor stood strong and spoke truth in the face of rudeness from the elected officials.
If the industry wants the bill to pass
and the community doesn't…
it's not real reform.
But you don't have to take our adorable word for it:
Every major paper in Missouri is coming out against the bill.
So what do we want instead?
We need real reform, not industry giveaways.
The Military Lending Act caps rates on short-term loans at 36%. It's got bipartisan support from Missouri representatives Sam Graves and more.
If military families need protection from predatory lenders, all Missouri families do, too.
It's time to cap the rate on payday loans in Missouri to 36%.
We believe that every Missouri family deserves the opportunity to thrive. The abuses of the payday loan industry are a direct threat to the dignity and opportunity of the most vulnerable people in our state. Responsible limits on interest rates will allow lenders to continue their business but ensure that short term loans actually help borrowers. It's time to shift the balance back in a healthy direction – predatory lenders are taking way too much, leaving the community with way too little. Balanced limits will allow money to actually stimulate the local economy, rather than getting siphoned away through interest and fees.
So how can you help?
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Communities Creating Opportunity exists to discover, develop and direct the power of people of faith to move human dignity to the center of public life. Working in more than 100 diverse congregations throughout the Kansas City metro, we equip leaders to transform the systemic barriers to opportunity and promote racial equity. We also like cats. Learn more atCCO.org, and Happy April Fool's Day.
Devised and crafted by Andrew Kling.