Supporters of a proposal to severely restrict the fees charged by payday lenders are, like their opponents, challenging in court an estimate of the measure’s impact on state revenues.
Missourians for Responsible Lending is proposing to cut the maximum interest rate on the Payday loans for attorneys to 36 percent, mirroring the limit set in federal law for such loans to soldiers and sailors. The financial impact of the measure was evaluated by State Auditor Tom Schweich, who rejected estimates from state agencies that it had no impact and instead accepted parts of an analysis by University of Missouri economics Professor Joseph Haslag.
Haslag assumed every payday lender in Missouri would close and concluded the state would lose $2.5 million to $3.5 million in tax revenues, with unknown local government impacts because of loss of licensing and other fees.
There is no reason to believe Haslag’s estimate is any better than that of the state and local entities that determined there would be no impact, said Rudy Pulido, a Baptist minister from St. Louis who is a leader in the initiative drive.
The lawsuit was filed in Cole County and names retired Missouri Adjutant General George Shull and retired priest Jerry Stockman as plaintiffs. No hearing date has been set.
“The state auditor is required to ask the various legal entities throughout the state what is going to be the fiscal impact of that,” Pulido said. “Most of them came back and said there is not going to be any economic impact.”
Missourians for Responsible Lending filed their lawsuit Friday, the day after Kansas City attorney Todd Graves, a former U.S. attorney and brother of U.S. Rep. Sam Graves, joined with Jefferson City attorney Chuck Hatfield, formerly a top aide to Gov. Jay Nixon, to file a challenge claiming Schweich had understated the fiscal impact in his analysis.
Haslag could not be reached for comment this morning. Haslag directs the Economic & Policy Analysis Research Center at MU and is a former director of the conservative Show Me Institute.
Gary McElyea, a spokesman for the auditor’s office, said “the state auditor’s office and secretary of state are frequently named in petition initiative lawsuits” and that the office would have no further comment on the litigation.
Missourians for Responsible Lending is pushing its initiative because the Republican-led legislature has stymied attempts to restrict payday lenders. There are more than 1,000 lenders making the loans, which are for up to $500 for 31 days or less.
Lenders are allowed to charge fees and interest totaling more than 1,900 percent under Missouri law. Lenders typically charge about $20 for each $100 borrowed for two weeks. Missouri law allows the Payday loans for auctions to be renewed up to five times, with a new fee being charged at each renewal.
The proposed initiative, which will need about 100,000 signatures to make next year’s ballot, would limit renewals and require a statewide database to make sure borrowers do not take out multiple loans in excess of the state’s $500 limit.