“Most borrowers cannot repay the loans.” Still said. “It’s a defective product when 75 percent of the people cannot pay back a loan and must go back and get another loan and get in the pattern of chronic debt.”
Last fall, Still held a hearing on payday loan practices in Columbia, which has twice as many payday loan shops — 24 — as McDonald’s restaurants. According to the Missouri Division of Finance, there were 1,315 payday loan stores operating in the state last year, issuing 2.83 million loans at an average of about $290 with average annual percentage rates of 430 percent. On average, each borrower renewed the loan more than once. No neighboring state allows loan
renewals.
“Missouri’s weak payday loan laws have attracted major out-of-state lenders to engage in predatory lending, costing Missourians who can least afford it millions of dollars a year,” concluded a report last year by the Better Business Bureau of Missouri.
Current practice provides for loans that must be repaid in two weeks. For a loan of $290, the interest and fee required for a 14-day loan is $47.95. The Division of Finance gets about 10 calls per day from people inquiring about payday lending or complaining about collection practices.
Still’s bill is one of three that could be considered during the legislative session that begins Wednesday. One bill in the Senate would prohibit renewals and impose the 36 percent rate cap. Another would allow for two renewals.
source here.
