“They [borrowers] are choosing a payday loan to keep from bouncing checks, or incurring late bill payment penalties,” said Tom Linafelt, a representative of QC Holdings, which operates several ‘Quick Cash’ locations in the Springfield area.
Opponents say it’s a rip-off, and the industry takes advantage of consumers. Cherry believes there is "a place" for payday loans, but believes the industry should be regulated better.
“Once they get into it, there is just no way to get out. They do not have the extra money to pay that loan back,” said Cherry.
Stricter laws governing the industry may soon be on the books.
The Missouri House gave first-round approval on Wednesday to a set of guidelines aimed at providing protections for the consumer. The vote was 99-57.
House Bill 656 seeks to lower the cap lenders can charge for interest from 75 percent to 60 percent during the life of a loan. Attempts in recent years to lower the cap to 36 percent failed to gather support from lawmakers.
The legislation would also limit the number of times that consumers can "renew" loans -- changing the number from six to three. A renewal, or rollover, allows a borrower to make interest payments every two weeks if they don’t have the full amount needed to pay off the loan.
Customers caught in the interest-cycle of the loan would be able to make interest-free payment plans with the lender under HB 656. Currently, some companies operating in Missouri offer long-term re-payment plans, while others do not. Also, companies would not be able to harass or threaten borrowers who fail to meet the obligations of their contract.
Furthermore, HB 656 would also requires a 24-hour waiting period from the time one pay off a loan to the time another loan can be taken out.
"The reduction in the number of possible renewals will certainly impact revenue,” said QC’s Tom Linafelt. “This will cost the industry tens of millions of dollars.”
Some say the legislation still isn't going far enough.
“I think it’s just a paint job on what needs to be a repair,” said Mike Cherry. “It’s not going to help people from getting into that situation and it’s not going to really help people getting out of it.”
The bill still requires a second vote in the House before moving on the Senate for debate and a vote there.