Attorney General Jay Nixon, Kansas City Leaders Call for Major Reform of Payday Loan Industry
Attorney General Jay Nixon, Kansas City Leaders Call for Major Reform of Payday Loan Industry
During these difficult economic times, payday loan industry takes advantage of Missouri’s most vulnerable families
KANSAS CITY, MO – As more Missourians are having trouble making ends meet during these difficult economic times, Attorney General Jay Nixon today called on the Missouri General Assembly to protect our most vulnerable families by cracking down on predatory payday lending practices. Joined by Kansas City-area elected officials and faith leaders at a downtown church, Attorney General Nixon called for major reform of the payday loan industry by: implementing stricter caps payday loan interest rates, eliminating the practice of renewing loans and providing tools for the Attorney General to punish lenders who violate the law.
State Rep. John Burnett (D-Kansas City), who joined Nixon today, has sponsored legislation to achieve those reforms, but the leadership in the Missouri General Assembly has not allowed that bill to come to a vote, or even to receive a hearing in committee. Nixon called for the legislature to bring the bill up for a vote before session adjourns in several weeks.
“The payday lending industry is making millions in profits each year by taking advantage of Missouri families who are struggling to pay the bills and make ends meet,” Attorney General Jay Nixon said. “As the economy continues to move backwards, it’s likely that even more Missourians will turn to payday loans to help them put food on the table and pay bills. These vulnerable families should not be slammed with unfair interest rates and a never-ending cycle of debt. I strongly encourage the Missouri legislature to take up Rep. Burnett’s bill and stand up for Missouri families during these difficult economic times.”
Missouri has some of the most lenient payday loan laws in the nation. Because of Missouri’s lax laws, some loan recipients could end up being charged as much as 1,950 percent APR (with an average of 422 percent). According to the most recent report by the Missouri Division of Finance, nearly 3 million payday loans were issued in 2006, and the number of new loan licenses given to lenders has increased by 59 percent since 2003. The result of these lenient laws: Missourian families paid $317 million in fees and interest in 2005, second in actual dollars only to the state of California.
“It’s inexcusable for the state to stand by while the payday loan industry holds working families hostage,” Rep. Burnett said. “Missourians are facing rising prices, home foreclosures and an economic crisis, and all payday lenders see is more profit. We’ve put forward a bill that would crack down on these unfair practices, and I look forward to the day when the Republican majority will give it the hearing it deserves.”
Attorney General Nixon, the legislators and faith leaders all pledged their strong support to Rep. Burnett’s bill, which would cap payday loan interest rates at 36 percent and eliminate the harmful practice of renewing loans – a practice prohibited by every bordering state. Renewable payday loans punish families unable to make payments by charging them astronomical interest rates to extend the period by which they can repay the loan.
“I’m proud to stand with Attorney General Nixon and these community leaders to speak out against this unjust industry,” said the Rev. John Modest Miles, pastor of the Morning Star Baptist Church. “Payday lenders prey on the weakest and poorest among us. By working together, I hope we can save generations of Missourians from lifetimes of debt and poverty.”
In April, voters in Kansas City approved an ordinance to require payday loan establishments to pay a $1,000 annual fee beginning in 2009 to reimburse the city for regulation of the businesses. Voters approved an additional ordinance to place new zoning restrictions on payday loan establishments.
“Last year, municipal leaders worked together and made incredible progress here in Kansas City with our payday loan ordinance,” said Kansas City Councilwoman Jan Marcason, who sponsored the payday loan ordinances that were recently approved by the voters. “The same progress could happen at the state level if folks would put people over politics and protect Missouri families from payday lenders. As our economy continues to falter, we need our state leaders to act now.”
“Reforming the payday loan industry is a critical step toward empowering individuals and helping communities grow,” said Gwendolyn Grant, president and CEO of the Urban League of Greater Kansas City. “Until we help people break the vicious cycle of debt, they can’t control their own futures. Left unchecked, payday loans will continue to trap hardworking Missourians and crush their dream of a better life.”
The coalition of leaders also supports a provision in the bill that provides the Attorney General Office the tools and authority to punish payday lenders who violate the law. Specifically, the Attorney General’s Office would be granted jurisdiction to issue cease and desist orders against violators. The Attorney General also would be granted authority to sue for injunctions, restitutions, rescission of loan contracts and civil penalties. Under current law, the Missouri Division of Finance regulates payday lenders, and the Office of the Attorney General only can take action when cases are referred by that division.
“Families forced to turn to payday loans to put food on the table probably don’t have extra money to hire an attorney,” Attorney General Nixon said. “The legislature needs to pass this bill and give the Office of the Attorney General the authority to punish payday lenders who take advantage of vulnerable Missourians and violate the law.”
Attorney General Nixon, the legislators and faith leaders made their announcement at a press conference in front of a payday loan center on Independence Avenue in Kansas City. In attendance at today’s press conference were: State Representatives Craig Bland, Mike Brown, John Burnett and Leonard Hughes; Jackson County Legislator Theresa Garza-Ruiz; Kansas City Councilwomen Cindy Baker-Circo, Melba Curls and Jan Marcason; the Reverends John “Modest” Miles of Morning Star Baptist Church and Nelson “Fuzzy” Thompson of the Southern Christian Leadership Conference; Ms. Gwendolyn Grant, president and CEO, the Urban League of Greater Kansas City; Lee’s Summit City Councilman Allan Gray; and Velda Cook, secretary of Freedom Inc.
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