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Missouri PSC Bans Utility Payments from Payday Lenders

September 23, 2016—Missouri has joined several other states, including Arizona and Nevada, in banning payments to utility companies from payday lenders. The amendment to the Missouri Public Service Commission (PSC)’s Code of State Regulations went into effect August 31, 2016.

In its comments on the amendment, Empower Missouri, an advocacy organization, described the social ills that befall low-income households who participate in payday loans and the cycle of debt created by such high-interest loans. These words were echoed in the written comments submitted by the Legal Services of Eastern Missouri. AARP and the Consumers Council of Missouri also supported the amendment.

Payday lenders, according to a report by the National Consumer Law Center (NCLC), typically offer their borrowers unsecured, short-term, high-interest loans and market them as a “quick fix” in household financial emergencies. The cost usually ranges from $15 to $30 for every $100 borrowed. The typical loan amount is $350. On the payment due date, the borrower can either let the lending company deposit the pre-written check the borrower provided them, or they can allow the debt to roll over and pay an additional fee. In the end, the typical annual percentage rate on such a storefront payday loan can, if the loan is rolled over each month, come out to 391 percent. According to the Center for Responsible Lending, roll-over of payday loans accounts for 75 percent of all payday loan volume.

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