Bill restricting payday loans sent to governor

JEFFERSON CITY, Mo. -- Interest rates would be capped on payday loans under a bill agreed to by consumer and industry advocates and sent to Gov. Bob Holden on Monday.

The House passed the legislation overwhelmingly and with little debate, after supporters warned that any changes could jeopardize a carefully crafted compromise.

The Senate had passed the bill last month.

Payday loans are short-term loans for $500 or less. Customers receive cash by writing a check for the loan amount plus a fee, which the lender holds until the customer's next payday. Under current law, some payday loan companies have charged more than 300 percent interest.

Under the bill sent to the governor, interest and fees on so-called payday loans would be capped at 75 percent of the principal, meaning a lender could charge no more than $75 for a $100 loan.

The bill also requires borrowers to pay at least 5 percent of the principal when renewing the loan and limits renewals to six times -- about half the number allowed under current law.

Supporters said the bill would prevent people in need of quick cash from building up a debt that they can never repay.

"It's that endless spiral that gets people into trouble, and this stops that," said Rep. Chris Liese, D-Maryland Heights, who handled the bill in the House.

The bill was sponsored by Sen. Ronnie DePasco, D-Kansas City.

Lobbyist Larry Weber said the bill also could prevent payday loan businesses from turning delinquent accounts over to prosecutors -- a current practice viewed as harsh by consumer advocates.