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MO: Voters won’t get chance to lower payday loan interest rates

By   /   September 5, 2012  /   No Comments

By Johnny Kampis | Missouri Watchdog

A proposed ballot measure would have capped annual interest rates on payday loans at 36 percent.

ST. LOUIS — The fight to cap the interest rates charged by the payday lending industry will have to wait another year.

Not that state lawmakers — whose campaign coffers are lined with donations from the industry — are eager to join in the fray.

Missourians for Responsible Lending circulated petitions trying to get an initiative on the general election ballot that would cap the annual rates for these short-term loans at 36 percent, but Secretary of State Robin Carnahan said the group did not have enough valid signatures.

MRL, a grassroots campaign formed to fight the payday loan industry, argued that some signatures deemed invalid should have been counted and sued Carnahan. The group announced Monday it was withdrawing the challenge, because the legal fight wouldn’t end before ballots are certified in two weeks.

“The people of Missouri have the right to place important public policy issues on the ballot,” said the Rev. Jim Hill, president of Missouri Faith Voices,  a statewide faith-based group aimed at solving problems facing Missouri communities. “Unfortunately, opponents have taken that right from the people, and subjected it into a battle of legal attrition.”

Washington, D.C. think tank Public Campaign released a study earlier this summer pointing out that Missouri has one of the largest concentrations of payday loan businesses in the United States, and companies in the industry have given more than $1.6 million to the campaigns and election committees of state lawmakers since 2000.

QC Holdings, based in Overland Park, Kan., contributed $6,725 in 2000, a number that steadily grew each election cycle before hitting $146,300 in 2010. The company operates 100 Quik Cash stores in Missouri, making it the largest such company in the state.

In its annual report, QC Holdings told the Securities and Exchange Commission that it had spent “substantial amounts” fighting the proposal and would have spent more to fight the measure had it made the ballot.

“If the Missouri ballot initiative is placed on the ballot and passes, we would be forced to cease our payday lending operations in Missouri, which would have a material adverse effect on our results of operations,” the company wrote in the report.

QC Holdings said the Missouri branches accounted for 35 percent of the company’s gross profits last year.

The next highest donors also ramped up contributions in the past decade.

Florida-based Consumer Lending Alliance’s donations increased from $8,375 to $73,250 between 2000 and 2010. Advance America Cash Advance, based in South Carolina, bumped its political financial clout in Missouri from $2,050 to $45,875 in the past decade.

The industry gave more than $1 million to state candidates between 2000 and 2010, about $370,000 alone for the 2010 elections.

House Speaker Steven Tilley

House Speaker Steven Tilley, R-Perryville, benefited the most, receiving $40,375 between 1999 and 2010, $36,500 of which was given after his promotion to House majority leader. He got another $32,150 from the industry in 2011, for pushing through House Bill 656, which capped payday loan interest rates at the industry-friendly level of 1,565 percent per year.

The House voted 96 to 56 in favor of the bill. Public Campaign found that those who voted “yes” received an average of $1,064 from the industry, while those who voted “no” got an average of $382.

Tilley reached the end of his two-term limit this year and announced in August his immediate resignation from office. He could not be reached for comment.

Other top recipients between 2000 and 2010 include:

  • Senate Minority Leader Victor Callahan, D-Independence, with $23,950;
  • Democratic Gov. Jay Nixon with $14,250;
  • House Minority Leader Mike Talboy, D-Kansas City, with $12,375;
  • House Majority Floor Leader Tim Jones, R-Eureka, with $12,150.

“Just as payday lenders trap working-class Missourians in a cycle of debt, these same lenders trap lawmakers in a cycle of influence — getting campaign cash to get elected and then getting rewarded for a job well done,” said Nick Nyhart, president of Public Campaign.

The industry gave another $650,000 to various election committees since 2000. The largest recipients include:

  • House Republican Campaign Committee of Missouri with $166,364,
  • Missouri Republican Party with $94,430,
  • Missouri Democratic Party with $54,000,
  • Missouri House Democratic Campaign Committee with $38,800,
  • Missouri Senate Democratic Campaign Committee with $38,550.

The Center for Responsible Lending found that Missouri is one of only seven states with an average of more than five payday loan shops per 10,000 households.  This nonpartisan nonprofit fights what it calls predatory lending practices.

These stores generally offer short-term loans of less than $500 for people who need a small amount quickly, with the recipient paying the money back when they receive their paycheck.

Critics note that most customers are those with low incomes who can least afford to pay high interest rates, and often have a hard time paying back the loans.

MRL says the average annual interest rate for these businesses that operate in Missouri is more than 400 percent.

Opponents of the ballot measure said these businesses can provide a better deal than banks, with short-term interest rates less than overdraft fees or late payment penalties.

“The real winners today are the thousands of Missouri families who will continue to have access to valuable credit options,” said Missourians for Equal Credit Opportunity in a statement. MECO is a campaign committee formed by the payday loan industry.

Carnahan said last month that the payday loan proposal did not garner an adequate number of signatures in one of six required congressional districts.

State law requires such ballot initiatives to garner signatures from 5 percent of those who voted in the gubernatorial race in the previous election in six of Missouri’s eight congressional districts.

She didn’t specify the lone district, but measure supporters said it was in the St. Louis area, and the number of signatures deemed valid by Carnahan was only 270 short of making it on the ballot.

Carnahan, who completes eight years as SOS this year, is not seeking elected office in November. The payday loan industry was not a major contributor to her previous campaigns, finance reports show.

Contact Johnny Kampis at johnny@missouriwatchdog.org. 

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Johnny Kampis is a content editor at Watchdog.org, and is helping to start the organization’s Alabama Watchdog bureau in his home state. Johnny previously worked in the newspaper industry and as a freelance writer, and has been published in The New York Times, Time.com and Atlanta Journal-Constitution.