JEFFERSON CITY, Mo. – Lt. Governor Joe Maxwell, speaking at a news conference one week before the state's payday lending law went in to effect, recognized credit unions' efforts in offering consumers an alternative to payday lending. At the news conference on August 21 that was held at American Eagle CU, a division of Anheuser-Busch Employees' CU, Maxwell asked credit unions to help generate ideas on alternative products and services, consumer education and removing statutory and regulatory barriers to providing small loans. "The system for consumer credit is not working right now," he said. At the news conference, Maxwell recognized Anheuser-Busch Employees' CU and American Eagle Credit Union for their efforts in reaching out to the underserved. Missouri's payday lending law, S.B. 0884, which restricts the interest and fees that can be charged on payday loans, became effective August 28. Introduction of the bill in the state Senate in January followed the earlier introduction of two other payday lending-related bills: S.B. 940 would have limited fees charged on payday loans to $15 per $100 of principal for the first 30 days and 3% per month for any loan extended beyond 30 days; H.B. 1501 applied to unsecured consumer loans of $500 or less in which cash was advanced with an original term of 30 days or less and a single payment was expected. Both of those bills died in committee. Among the provisions of the new payday lending law, it: * provides that after the first renewal of the loan, the borrower must reduce the principal amount of the loan by not less than 5% of the original loan amount until it is paid in full. * no loan can be renewed more than six times. * creates a new Section 408.505 that applies to payday loans, any person determined by the Division of Finance to have entered into a transaction that is "a disguised loan," and any person "determined by the Division of Finance to have engaged in subterfuge to avoid this section." * allows a lender to change any simple interest or fees agreed to by the parties to the loan. But no borrower will be required to pay a total amount of interest and fees more than 75% of the initial amount on any single loan and all renewals; * requires all original or renewed payday loans to be for a term of at least 14 days, but no more than 31 days; * a loan is considered completed if a lender presents the check for payment or the consumer redeems the check by paying the full amount to the lender. Once a loan is completed, the consumer can enter into a new loan with the lender. * with limited exceptions, a loan cannot be repaid from the proceeds of another loan made by the same lender. A lender cannot have more than $500 in loans to the same borrower at any one time. The law also requires the Division of Finance to make a report to the general assembly beginning on Jan. 1, 2003, and every two years from then on that contains information about the number of payday loan licenses issued, the number of loans issued by licenses, the average face value of the loans, the average number of times that the loans are renewed, the default rate for the loans, the number and nature of complaints made to the Division of Finance, the average interest and fees charged, and a comparison of the interest and fees charged in Missouri and adjoining states. -

[email protected]