NEW LAW PRESERVES SAFE CREDIT OPTIONS FOR MISSOURI BORROWERS
Jefferson City (May 15, 2014)— A new law that will preserve access to safe and affordable small-dollar credit for Missouri borrowers went to Governor Jay Nixon yesterday, having passed both houses of the General Assembly with large majorities. The law was today applauded by Stand Up Missouri, a group representing traditional installment lenders, their customers and supporters, as a major breakthrough in its effort to ensure access to safe and affordable credit in the state.
Senate Bill 866, which passed the house with 128 votes and the senate with 28, recognizes the unique characteristics of traditional installment loans. It is these characteristics that have led to them be widely considered a safe alternative to other forms of small-dollar credit. The bill’s provisions also ensure that installment lenders do not get caught up in actions by local governments seeking to crack down on less safe forms of small-dollar credit, a process which could lead to the creation of “credit deserts’ in the state, where borrower demand could not be met by any legal means.
The bill was introduced in reaction to the prospect of lending laws which do not take into account important differences between types of credit. It clearly defines installment loans as fixed rate, fully amortized, closed-end extensions of direct consumer loans – being repaid in regularly scheduled, equal installments of principal and interest, unlike loans that carry a “balloon payment”. It is balloon payments (the amount of the loan due in full at a certain time) that many blame for creating a ‘cycle-of-debt, whereby borrowers who cannot pay have no option but to renew the loan.
Organizations ranging from the US Department of Defense through to the Consumer’s Union have recognized installment loans as safer credit, noting that they are fully underwritten and assess the borrower’s ability to repay. Furthermore, installment loan data is reported to credit bureaus, helping borrowers build credit history and increase their credit scores.
“As the state and municipalities look to crack down on certain types of small-dollar credit, this common-sense bill will allow us to avoid inadvertently creating credit-deserts in Missouri, where no legal forms of credit are available to needy borrowers,” said Tom Hudgins, Chief Executive at Stand up Missouri. “We applaud the hard work of Senator Wasson, Senator Cunningham and their colleagues in both houses. We are glad that Missouri’s installment lending industry can be part of a solution to the challenge of preserving credit access in the state, while addressing issues related to less safe loan products.” ENDS
About Stand Up Missouri
Stand Up Missouri is a nonpartisan coalition dedicated to educating Missourians about their right to informed credit choices and to protecting their access to safe and affordable traditional installment loans. Stand Up Missouri does not represent payday lending or payday interests.