Payday loans

Proposition S will appear on the March 7 primary election ballot and ask voters to approve charging a $5,000 annual permit fee for short-term lending institutions – such as payday loan stores – to operate in St. Louis city.

Alderwoman Cara Spencer (Ward 20), who championed the proposition, said that the revenue from the fees will go towards funding an office in charge of oversight and regular inspections of the lenders.

“Missouri has more payday loan storefronts than McDonalds, Starbucks and Wal-Mart stores combined,” said Spencer, who is also the executive director of the advocacy nonprofit Consumers Council of Missouri. “There is no shortage of short-term lending in this state, and clearly there is a need for it.”

Prop S would also require payday lenders to post onsite APR (annual percentage rate) information and provide information from the St. Louis Treasurer's Office about alternative financial assistance and lending.

“This information is currently not clearly presented to customers who often end up paying far more than they anticipated,” Spencer said.

Excess funds could be used to re-invest in low-income communities through existing programs, such as Healthy Home Repair.

The bill also would strengthen existing zoning regulations, including restricting payday lenders from operating within a mile of another payday lender, and will allow for more oversight and inspection. It also would require that lenders adhere to a “Good Neighbor Policy” that restricts signage, hours and sale of drugs and alcohol onsite.

Every year 11 percent of Missourians take out a payday loan, and they pay an average of 452 percent interest on the loans, Spencer said.

“Data consistently show that these loans typically ensnare people into debt traps,” said Mike Calhoun, president of the Center for Responsible Lending. “The billion-dollar revenues generated from these loans are premised upon borrowers’ inability to pay and the resulting lucrative turnstile of debt created with every loan renewal.”

Missouri has the highest rate cap of all states with a cap, allowing for 75 percent interest on a two-week loan. About $5 to $10 million are extracted out of St. Louis’s most vulnerable communities through payday lending, Spencer said. Over the years, several bills have been introduced in the Missouri state legislature that would lower the allowed interest rates, but each bill has failed.

“Recognizing the legislature’s inability to take action, the St. Louis City Board of Aldermen passed municipal code in 2016 which takes important steps toward regulation by requiring each short-term leader to have a permit to operate within the city,” Spencer said.

Spencer sponsored the board bill that establishes the language of Prop S, and it passed almost unanimously at the Board of Aldermen.

Opponents of the proposition say the fee could be passed on to consumers. However, Spencer said that additional fees are not possible.

“Lenders already charge the most that they can by law,” Spencer said. “Additional fees are prohibited.”

Others worry that this will push short-term lenders outside of the city, leaving those in need of fast cash without access.

“With interest rates five times the rate caps of all neighboring states, we feel confident that lenders enjoying the extremely high profits allowed in St. Louis will not be deterred by a permit fee,” Spencer said. “Kansas City has enacted a similar fee, and there are still plenty of lenders in our neighboring city.”

At the February 22 St. Louis City Mayoral Forum, candidates were asked whether or not they plan on voting for Prop S.

Alderman Antonio French (Ward 21) said he plans to vote “no.”

“I don’t think it’s fair that we make that business 10 times worse than liquor stores,” French said.

He later told The St. Louis American that the way to rein in payday lenders is to limit the amount of interest they can change – which happens at the state or federal level.

“I’m not a supporter of Prop S because it doesn’t fix the problem,” French said.

At the forum, Alderwoman Lyda Krewson (Ward 28) said she will vote for Prop S.

“I think we have way too many payday lenders,” Krewson said. “I don’t like the $5,000 fee for a payday lender because I wonder where that goes to next. Does it next go to a business we don’t like? But I will vote for it.”

City Treasurer Tishaura Jones said she will “absolutely” vote in favor of it.

“We need to get rid of payday lenders,” Jones said.

Board of Aldermen President Lewis Reed said he will vote “yes.”

“But I think there are going to be challenges in the court,” Reed said.

Prop S is the only proposition on the March 7 ballot. Absentee voting is underway.

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(1) comment


11% of Missourians is a lot of people that can’t make it to the next payday. That’s the real problem. What are we doing about that? Charging the payday lenders to employ more bureaucrats is not helping that 11%. It’s helping the government.

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