Is Progress Being Made on Ferguson Commission Payday Loan Recommendations?

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The Ferguson Commission recommendations are presented as a potential roadmap for moving forward in the St. Louis area following this year’s protests stemming from the not guilty verdict in the murder trial of a former officer of the Saint-Louis metropolitan police. Some of the proposals deal with predatory loans, which often trap low-income people with loans with very high interest rates.

There have been developments to address the issue in St. Louis, Jefferson City and Washington, DC since the commission issued a final report.

Members of the panel, which was created after Michael Brown’s death in 2014 to find potential solutions to racial tensions in the region, called for an end to predatory lending by changing underwriting standards, payment terms, collection practices and how high interest rates can make short term loans. The commission called for a cap at 26%, while the rate on a two-week loan in Missouri could reach 75%.

A measure adopted by voters in the city of Saint-Louis this year is designed to be a starting point.

“The purpose of Proposal S was to put some of the payday loan regulation in the hands of local municipalities,” Ward 20 Alderman Cara Spencer said.

“It imposes a fine that allows the city to actually fund the regulation of the industry. But its special feature is that it also requires lenders to provide their clients with a list of payday lender alternatives.

Spencer is also the executive director of the consumer advocacy group, Consumers Council of Missouri. The organization has been studying predatory lending for some time, and Spencer says the state has the highest rate cap in the country for payday lenders. That’s 75% interest on a two week loan.

“That translates to an APR of 1,000 to 950%. It’s absolutely amazing.”

But there isn’t much that elected city leaders can do. Probably the biggest change should come from lawmakers in Jefferson City. A bill to limit the number of times a loan can be renewed was not heard in this year’s legislative session. But his main supporter, Republican State Representative Charlie Davis of Webb City, is not giving up. He plans to file it again next year. It also limits the number of payday loans that a person can take out at the same time, but it does not deal with interest rates.

“On a very short term loan, one week or two weeks, a high interest rate is irrelevant,” he said.

“Because you pay for it. You pay a little extra money and you’re done.”

The Davis Bill is not linked to any recommendation of the Ferguson Commission.

(This map shows the locations of many short-term loan companies in St. Louis at the end of February 2017. It was originally included in an article by Maria Altman of St. Louis Public Radio on Proposal S.)

Even though lawmakers in Jefferson City do not seem ready to tackle the interest rate side of the problem, one person who had to resort to a payday loan a few years ago to pay sudden bills insists the fact that something has to be done.

“What I got was roughly one thousand percent,” said Cedric Jones, whose story is highlighted on the Forward Through Ferguson website.

“If you get it, you have to pay it off the next payday, but it’s still an astronomically high interest rate.”

Along with St. Louis and the Missouri State Capitol, the issue continues to gain attention in Washington. The Consumer Financial Protection Bureau recently finalized a rule that would require lenders to ensure that a customer has the capacity to repay the money loaned. But its implementation is uncertain. Office manager Richard Cordray is stepping down in a few weeks and could be replaced by federal budget manager Mike Mulvaney.

This could change the course of CFPB.

Mulvaney is considered more favorable to banks and payday lending operations. He would have the option of delaying any regulations that have not yet come into effect, including the payday loan rule. It is considered controversial. At least one business organization, Financial Service Centers of America, has spoken out against the proposal. He claims the rule would “devastate” an industry that has 30 million customers per year and 60,000 jobs.

In a statement, the organization said the financial service center industry was “already a highly regulated industry.”

This organization refused an interview request. The CFPB did not make someone available for a taped interview.

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