Missouri Lawsuit Seeks to Change Language in New Payday Loan Petition
If Passed, Proposal Would Cap Interest Rates on Car Title and Payday Loans
by Kevin Schneider on August 19, 2011
A lawsuit was filed in Cole County Circuit Court on August 19th which seeks to change the language used on a measure which would cap interest rates on auto and payday loans in the Missouri, effectively shutting down both industries. The suit was brought to the courts in Jefferson City by John Prentzler, who owns a business which gives payday loans. It claims that the language on the ballot is misleading about the costs of closing these businesses.
As reported on this blog earlier, the measure is currently part of petition which will need a certain number signatures to be placed on the ballot. If passed would shut down payday loan stores in the state, which the Missouri Division of Finance estimates at more than 1,600 locations.
The exact wording of the ballot states that implementing the measure would cost between $2.5 and $3.5 million. These amounts would be offset by the reduced spending in Missouri on regulation of the payday loan industry.
Prentzler’s lawsuit argues that these numbers are not true. A fiscal impact summary authored by University of Missouri economics professor Joseph Haslag states that the states gross domestic product would drop by $57 million in the first year and $57.5 million in the second due to lost tax revenue. Furthermore, it states that closing down the stores would lay off thousands of employees, which would cost the state an estimated $8 million in unemployment benefits.
If the lawsuit is successful, the language would have to be changed on the ballot. It would also mean that any signatures previously collected on the original petition would be voided.
Current Missouri Laws & Regulations allow the total interest and fees charged on payday loans to represent up to 75 percent of the total loan amount. If passed, the proposed measure would drop the maximum interest rate to 36 percent.
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