Missouri is in the crosshairs of a national debate over payday loans. This is partly because the industry is huge and wields a lot of political power in the state, but also due to a growing, grass- roots consumer movement. Payday lenders say they provide necessary alternatives to more costly bank overdrafts and credit card debt, but consumer activists aren’t buying it, and are working to provide alternatives for short term loans.
As the Rev. Susan McCann stood outside a public library in Springfield, Mo., last year, she did her best to persuade passers-by to sign an initiative to ban high-cost payday loans. But it was difficult to keep her composure, she remembers. A man was shouting in her face.
Short-term lenders make big profits in Missouri. QC, which mostly does business as Quik Cash, has 101 outlets in Missouri and in 2012, one-third of the company's profits came from the state, twice as much as from California, its second-most profitable state.
Payday lenders are notorious for their sky high interest rates, and the people who use these storefront creditors are oftentimes the ones least able to pay.
In the first part of Wednesday's Up to Date, Steve Kraske talks with ProPublica reporter Paul Kiel about the situation in Missouri, where attempts to regulate these businesses—such as capping interest rates—keep getting defeated.
Payday loan shops provide small, short-term loans. A typical loan ranges in size from $100 to $500, and must be repaid within two weeks. The industry contends that such loans help people pay for unforeseen expenses.
But many people believe that such loans are harmful because of the amount of interest charged. In the state of Missouri, the average APR on payday loans is above 400%.
Kansas City, MO – Missouri has some of the loosest regulations in the country for the payday loan industry. The state is home to almost 1300 payday loan operations, compared to neighboring states that report 500 or fewer payday loan businesses.