ST. LOUIS, MO (KTVI - FOX2now.com) -
Payday loans may help some consumers through a short term cash crunch, but the industry is under fire. Missouri lawmakers want to tighten lending restrictions, but the industry says it could put them out of business and eliminate thousands of jobs. They are popping up on nearly every street corner. Payday loans.
They are quick, convenient, cash-on-the-spot, but consumer groups say the lenders are causing a financial crisis in Missouri.
Chris Thetford of the Better Business Bureau said, "Consumers get into a debt trap with this sort of financing vehicle. People think it can be a solution for the short term financial problems but ultimately they find out it digs them deeper and deeper into a debt spiral."
The Better Business Bureau testified Thursday night at a hearing to regulate the state's payday loan industry.
Several state lawmakers are sponsoring bills to tighten the lending laws and cap interest rates at 36-percent.
"The regulation that currently exists is that it allows lenders to charge up to 1,950 percent interest on a payday loan," said Thetford.
State Senator Joe Keavany said, "We need to hear from the public what their issues are and we need to hear from the industry about their issues and hopefully we can go back to Jefferson City and (do something.)"
For comparison's sake, on the Illinois side of the river, there are already regulations capping the interest rates payday loan companies can charge. They can tack on $15.50 for each $100 they loan someone. In Missouri they can charge you $75 for each $100 they loan you. That's 75% interest. Missouri is one of the ten least regulated states in the industry.
But lenders say the current interest rates are fair and payday loans are the only way a consumer can get a short term loan of $500 or less.
Tom Linafelt of QC Holding said, "More than 90-percent pay their loans back on time without incurring any further debt."
QC Holdings is the largest payday lender in the state with 105 locations. The company says the industry wouldn't survive if interest rates were capped.
"That is what would put the industry out of business," said Linafelt, "and leave 10-thousand of its employees out of work."
Linafelt says they also contribute almost $150 million in state taxes.
"It would also eliminate about $20 million in worth of real estate lease payments," said Linafelt.
There are two bills currently filed in Jefferson City to reform the payday loan industry and cap the interest rates.
Lawmakers say most likely after the hearing they will work on drafting a larger bill to present to the General Assembly.
State By State Payday Loan Regulations
They are quick, convenient, cash-on-the-spot, but consumer groups say the lenders are causing a financial crisis in Missouri.
Chris Thetford of the Better Business Bureau said, "Consumers get into a debt trap with this sort of financing vehicle. People think it can be a solution for the short term financial problems but ultimately they find out it digs them deeper and deeper into a debt spiral."
The Better Business Bureau testified Thursday night at a hearing to regulate the state's payday loan industry.
Several state lawmakers are sponsoring bills to tighten the lending laws and cap interest rates at 36-percent.
"The regulation that currently exists is that it allows lenders to charge up to 1,950 percent interest on a payday loan," said Thetford.
State Senator Joe Keavany said, "We need to hear from the public what their issues are and we need to hear from the industry about their issues and hopefully we can go back to Jefferson City and (do something.)"
For comparison's sake, on the Illinois side of the river, there are already regulations capping the interest rates payday loan companies can charge. They can tack on $15.50 for each $100 they loan someone. In Missouri they can charge you $75 for each $100 they loan you. That's 75% interest. Missouri is one of the ten least regulated states in the industry.
But lenders say the current interest rates are fair and payday loans are the only way a consumer can get a short term loan of $500 or less.
Tom Linafelt of QC Holding said, "More than 90-percent pay their loans back on time without incurring any further debt."
QC Holdings is the largest payday lender in the state with 105 locations. The company says the industry wouldn't survive if interest rates were capped.
"That is what would put the industry out of business," said Linafelt, "and leave 10-thousand of its employees out of work."
Linafelt says they also contribute almost $150 million in state taxes.
"It would also eliminate about $20 million in worth of real estate lease payments," said Linafelt.
There are two bills currently filed in Jefferson City to reform the payday loan industry and cap the interest rates.
Lawmakers say most likely after the hearing they will work on drafting a larger bill to present to the General Assembly.
State By State Payday Loan Regulations
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