A legal battle has emerged over efforts to get a payday loan interest cap on the ballot in Missouri; two lawsuits have been filed against the potential measure. The law would follow similar legislation in other states that caps the amount of interest payday lenders can charge at 36 percent.
Missouri the latest state to try to cap payday loan interest
Many accuse payday lenders of everything from predatory lending to extortion. A number of U.S. states have capped the allowable interest rates, and others have banned them outright. A pending ballot measure in Missouri, according to the Columbia Daily Tribune, would let Missourians vote on whether or not to cap payday loans, car title loans and all other loan interest in the state at 36 percent. There are 17 states, according to OzarksFirst.com, that currently cap payday loan interest. The federal government has also capped payday loans and all other loans lent to active duty military personnel at 36 percent.
Lawsuits challenge potential measure
The proposal still has to gather a sufficient number of signatures to reach the ballot. However, the proposal has to survive a legal challenge against it. Two lawsuits have been filed against the Missouri measure, both asking for the language in the proposal to change before it is put on a ballot. One suit was filed by a pro-payday loan party and the other by an anti-payday loan party. The first suit, according to StLouisToday.com, filed by a party with interests in the payday lending industry, wants the language of the bill revised to reflect the estimated cost to the state economy should the bill be passed. The second, filed by proponents of the bill, contend that the estimated cost to the state of $8 million per year should be revised. It is contended that 20 different cities in Missouri, including St. Louis and Kansas City, estimated that a payday loan cap would have no effect on city budgets.
Caps becoming more common
A majority of states have some sort of payday loan regulation. In addition to the 17 states that have capped payday loan and cash advance interest rates, 15 have banned them outright, according to the Nashville Ledger. Some cities have tried regulating payday loans through zoning laws. According to YNN, the city of Austin, Texas, is currently proposing such a zoning ordinance. The city of Austin is currently looking into a minimum distance of 200 feet from any residences and 500 feet from a major highway. Members of the Austin city council contend that payday lenders target economically vulnerable people. Major banks are starting to get into the short term loan market as well. According to NASDAQ, Wells Fargo and U.S. Bank both offer a “direct deposit loan,” or a loan against the next direct-deposit into a customer’s checking account.