After years of debate, the Springfield City Council voted Monday to impose new regulations on payday lenders whose high interest rates can create a “debt trap” for desperate borrowers.
Among the highlights was a plan to impose $5,000 annual licensing fees subject to voter approval in August, that would go toward enforcing the city’s rules, helping people in debt and providing alternatives to short-term loans.
But Republican lawmakers in Jefferson City may have other ideas.
In action earlier Monday, Rep. Curtis Trent, R-Springfield, added language to a banking bill that attorneys, advocates and city leaders say could shield a number of payday lenders from fees targeting their industry.
The bill passed the House that day and cruised through the Senate the next with every Greene County lawmaker in support except House Minority Leader Crystal Quade, D-Springfield. It now heads to Gov. Mike Parson’s desk for a final decision.
Trent’s language specifically says local governments are not allowed to impose fees on “traditional installment loan lenders” if the fees are not required of other financial institutions regulated by the state, including chartered banks.
Trent and other Republican lawmakers argued the language had nothing to do with payday lenders, saying “traditional installment loan lenders” are a different thing altogether.
“There’s nothing to stop the city from putting an ordinance on their payday lenders,” Trent said in an interview Thursday. “It was not the intent to stop the city’s ordinance and I don’t expect it will be the effect.”
But John Miller, a retired Kansas City attorney who advocated for a similar ordinance in the suburb of Liberty, said that many payday lenders are also installment lenders.
“That’s how they’re trying to get around the ordinance in Springfield, the ordinance in Liberty,” Miller said. “They portray it as, ‘We’re a separate kind of business,’ but that’s not the way anyone who’s looking at reality would see it.”
Unlike payday loans, which must be less than $500 and are supposed to be paid back within weeks, installment loans can be larger and are paid back over four or more months. They can still carry triple-digit annual interest, though.
State records indicate there are 13 Springfield establishments licensed to provide both consumer installment loans and payday loans under names like Advance America and LendNation.
Springfield City Councilman Craig Hosmer, an attorney and former legislator, said that means Trent’s measure “at least brings the fee into question.”
“And that’s exactly what they want to do,” Hosmer said. “They want to protect this industry.”
He said industry attorneys would in turn use the law to take cities to court.
And even if Trent is right, Hosmer said, his bill also includes a powerful incentive for cities to back off: a provision saying that if lenders sue cities over their rules and win, they’ll be entitled to costs they incur, including attorney’s fees.
Hosmer worried the legislation might also spur any lenders still only offering payday loans to diversify to try to become exempt from fees.
Brian Fogle, the CEO of the Community Foundation of the Ozarks and a co-chair of a city committee appointed to study payday loans, said that would make sense given recent trends.
“A lot of these payday lenders are shifting to this type of product,” he said.
He allowed that expanding those offerings could have some positive effect for consumers because the loans are paid off gradually.
But he said lenders “are still charging very, very, predatory-high rates.”
Susan Schmalzbauer, an organizer with Faith Voices of Southwest Missouri who advocated for the city’s overhaul for years, said the whole thing was an attack on local control that looks like “a big gift to predatory lenders at the expense of the cities.”
She also noted that Trent’s measure passed despite never having a public hearing where citizens could speak up.
“To slip this into the bill is really a slap in the face to the constituents here all across the state,” she said.
Cara Spencer, a St. Louis alderman who led an effort to pass that city’s $5,000 licensing fee, echoed those concerns. (Kansas City’s annual fee is $1,000.)
“They snuck a provision into an omnibus bill that wasn’t even discussed or acknowledged by either house,” she said. “That is a crazy way of adding provisions that will have implications throughout our state.”
Quade, the House minority leader from Springfield, said the move was also an especially bad idea during a pandemic-fueled downturn that has seen hundreds of thousands of Missourians file for unemployment.
“People use the payday lending industry when they are in desperation and obviously, there’s a lot of that right now,” she said. “This will be harmful.”
The legislation is Senate Bill 599.
Austin Huguelet is the News-Leader’s politics reporter. Got something he should know? Have a question? Call him at 417-403-8096 or email him at firstname.lastname@example.org. You can also support local journalism at News-Leader.com/subscribe.
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