Holden signs payday loan bill over Nixon opposition

JEFFERSON CITY, Mo. -- Despite opposition from the state attorney general, Missouri Gov. Bob Holden signed legislation Thursday designed to cap interest rates on payday loans.

Holden, who signed the bill along with several others in Kansas City, said it strikes a balance between protecting consumers and the industry.

"Like most legislation that goes through the democratic process, the bill is not perfect," Holden said. "But the strength of its reforms in favor of the consumer far outweigh the flaws."

Attorney General Jay Nixon had urged the governor to veto the legislation, claiming it would shield lenders from consumer protection laws and allow them to charge consumers an annual percentage rate of up to 1,950 percent on loans.

Nixon also claimed the bill would allow such lenders to remain outside the reach of Missouri consumer fraud laws. "The bottom line is that this is the worst bill in the country. This isn't consumer protection," Nixon said Thursday. "This bill isn't even close to what we need. It's not in the same area code of consumer protection."

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 the new law that takes effect Aug. 28, interest and fees on so-called payday loans will be capped at 75 percent of the principal, meaning a lender could charge no more than $75 for a $100 loan.