JEFFERSON CITY – Gov. Jay Nixon vetoed legislation re-writing Missouri's payday loan laws Thursday, describing the newly proposed limits as an industry-backed "sham" that fell short of "true reform."
The Democratic governor said it was better to leave the law as it is, with the hopes of pushing for more stringent regulations in future years, than to enact a modest revision passed by the Republican-led Legislature.
"Missourians want meaningful payday lending reform, not a sham effort at reform that allows such predatory practices to continue," Nixon said in a written statement announcing the veto.
Missouri law currently limits interest and fees on payday loans at 75 percent for the life of the loan. If that full amount were charged on a typical two-week loan, it would amount to an annual percentage rate of 1,950 percent.
The legislation would have reduced the interest rate cap to 35 percent for the term of the loan, amounting to an annual percentage rate of 912 percent if the full amount were charged on a two-week loan.
Opponents and supporters of the bill both acknowledged that the caps are largely meaningless, because payday lenders do not usually charge that much.
A typical payday lender in Missouri charges an amount equivalent to an annual percentage rate of 455 percent, said Molly Fleming, policy director at Communities Creating Opportunity, a faith-based group in Kansas City that advocates for stricter limits on payday loans.
She praised Nixon's veto and said efforts to impose more significant limits on the industry could have been stymied had he signed the measure.
"To pass something that is actually nothing but to call it real reform is to plant a flag in an empty play field," Fleming said.
In addition to lowering the interest rate cap, the legislation would have repealed a law limiting payday loans to six rollovers. The bill would have banned loan renewals but allowed extended payment plans.
The industry group United Payday Lenders of Missouri remained neutral on the bill because of the rollover ban but supported other provisions, including an increase in the businesses' annual licensing fees, said association executive director and lobbyist Randy Scherr.
"The bill had several pieces in it that were intended to be a benefit to consumers that people had discussed over the years," Scherr said.
Nixon said the bill would have failed to prevent "the cycle of debt that payday lending perpetuates." He said the legislation "appears to be part of a coordinated effort by the payday loan industry to avoid more meaningful reform."