SS/SCS/SB 884 - This act modifies the interest and fees charged in payday loans.

This act provides that after the first renewal of the loan, the borrower must reduce the principal amount of the loan by not less than five percent of the original amount of the loan until it is paid in full. The act provides that no loan can be renewed more than six times.

This act creates a new Section 408.505. This section applies to payday loans, any person determined by the division of finance to have entered into a transaction that is a disguised loan, and any person determined by the division of finance to have engaged in subterfuge to avoid this section.

A lender may charge any simple interest or fees agreed to by the parties to the loan. However, no borrower shall be required to pay a total amount of interest and fees in excess of 75% of the initial loan amount on any single loan and all renewals.

All original or renewed payday loans must be for a term of at least 14 days, but no more than 31 days.

A loan is considered completed if the lender presents the check for payment or the consumer redeems the check by paying the full amount to the lender. Once a loan is completed, the consumer can enter into a new loan with the lender.

With limited exceptions, a loan cannot be repaid from the proceeds of another loan made by the same lender. A lender cannot have more than $500 in loans to the same borrower at any one time. A lender complies with this requirement if the lender receives a signed statement from the consumer in which the consumer attests to the fact that such consumer doesn't have more than $500 in loans from that lender.

The act provides that a person does not commit the crime of passing a bad check if the person receives a payday loan, unless the person closes the checking account on which the loan was made before the loan is paid back or the person stops payment on the check. A return check fee may be charged where cash is advanced in exchange for a personal check.

Any loan that charges fees in violation of this act shall not be enforceable. The act provides that lenders cannot use certain devices to avoid the provisions of this act.

The Division of Finance is required to make a report to the general assembly beginning on January 1, 2003, and every two years thereafter that contains information about the number of payday loan licenses issued, the number of loans issued by licensees, the average face value of the loans, the average number of times that the loans are renewed, the default rate for the loans, the number and nature of complaints made to the division, the average interest and fees charged, and a comparison of the interest and fees charged in this state and adjoining states.
JIM ERTLE