|By Ashley Russell on August 3, 2011
In many states pay day loans are a very popular form of short-term financing. These loans are very short term—usually the length of a bi-weekly pay period—and are designed to help those who are living paycheck to paycheck when unexpected expenses pop up in their lives. However, the high fees and rates associated with these loans have made them unpopular and often highly regulated in some areas, such as Missouri.
Missouri has laws that regulate payday loans that are different from many other states. In 2002, the state legislature enacted laws that required frequent reports about the payday loan industry. Before this new legislature, payday lending laws were not very strict, which caused them to be attractive lenders. One example of Missouri’s payday loan differences, compared to contiguous states, is that Missouri allows the renewal of payday loans, meaning that instead of paying them off you can re-borrow, while none of the surrounding states allow this. These lenient laws also mean that Missouri has many lending locations, especially when compared to the states around it (only Tennessee has more). Finally, Missouri also allows a much higher allowed APR, or the interest rate, for payday loans, 1950%. This is almost four times as much as the next highest contiguous state.
The unregulated industry of payday loans has led to a state where lenders rule the industry. Because there are little to no restrictions placed on these lenders, interest rates can be high enough to allow this to be a very profitable endeavor. Without payday loan laws, those who live paycheck to paycheck will continue to suffer a lack of access to money for fear of defaulting on a loan with such a high interest rates. Payday loans can be just what individuals need to keep from accruing late fees from debts; however, they are only beneficial if they can be repaid and are not associated with high interest rates.