The passing bill's sponsor, Rep. Ellen Brandom, R-Sikeston, developed the legislation in a bipartisan committee last summer. The bill with stricter regulations, which failed to pass through the committee, was drawn up by Rep. Mary Still, D-Columbia. Still's bill was defeated with an 11-5 vote in the House Financial Institutions Committee.
Payday loan offices lend small amounts of money to people who need quick cash. Payday loan offices provide an option for borrowers who need $500 or less — most banks usually don't lend amounts less than $1,000 — and they don't require borrowers to have good credit.
Lowering annual percentage rates
The biggest difference between the bills is that Still's failed bill would have cut the annual percentage rate charged by payday loan companies to 36 percent, which is less than a tenth of the current average; Brandom's bill would cap the APR at 1,564 percent. Because the APR is figured for a calendar year, it would be divided by 24 to figure the interest rate for a two-week loan.
The current average APR for the loans in Missouri is 444 percent, according to a report by the Missouri Division of Finance.
Still said her goal for the legislation was to keep the payday loan industry fair and to prevent lenders from taking advantage of consumers with high interest and APR rates.
"Never in the history of our country have we allowed usury at this rate ... Al Capone would be embarrassed by this," Still said.
Increasing loan awareness
Brandem's bill would require loan offices to post the price for loans per $100. For example, with the current rate, a sign in a loan office would read that a $100 loan would cost a consumer $17 to borrow for two weeks, Brandem said.
Another provision of the bill would prohibit borrowers from taking out a second loan for one business day after their previous loan has been repaid. Brandom said this would curb impulsive spending. The bill would also allow loans to be renewed just three times, instead of six.
Staying in businessIf Still's bill had passed, the 36 percent APR on a two-week loan would break down to a $1.38 charge on a $100 loan. This breaks down to less than 10 cents a day.
"You can't operate," Wells said. "You can't even turn on your lights in a store for $1.38."
Wells owned his own payday loan office before turning his full attention to his position in the Missouri statehouse.
"The customers I had were friends and neighbors," Wells said. "I'm not talking about just the poorest of the poor; I have school teachers who use them, state workers, anyone who has too much month at the end of the money."
Three amendments were proposed to the bill in committee, but none passed the vote. Brandem's bill passed 13-3 and will move to the House Rules Committee before going to the floor for discussion.