(KMOV.com) -- This week, a group of community and religious leader got approval to start collecting signatures to get a proposed new law on the ballot next year that would set a limit for interest on payday loans at just 36%.
Considering mortgage loans carry an interest rate around 4 or 5%, interest rates on payday loans seem almost unreal. Some people who take out payday loans with a high interest rate have to get another loan to pay them off.
"They just go shop to shop to pay them off with one loan to the next, so it is a spiral. It's a debt spiral," says State Senator Joseph Keaveny. Keaveny represents north St. Louis where a paycheck does not last until the next paycheck for some families.
The solution is quick cash, but at a high price. In Missouri, the average payday loan is $307 and is paid off in 14 days, but interest and fees add up to an additional $52. Last year there were nearly 2.5 million payday loans. Senator Keaveny proposed laws to put limits on loans the last two years, but cannot convince his colleagues to support it. Keaveny said, "the payday loan industry has a very strong lobby in Jefferson City."
The payday loan industry in Missouri sees themselves as helping families get through financial emergencies, not causing them. There is also concern in Washington over the rates and tactics of the payday loan industry. Missouri Senator Claire McCaskill said, "We've got to make sure we oversee the industry so that the rules of the road are fair and easily understood and that the interest rates aren't so high that it offends one's conscience."
Keaveny says if the legislature cannot muster the support to do something about the loan interest rates, hopefully, voters in the state will.
If you think the interest rates charged by payday loan businesses are ridiculously high, we have some links so you can show your support for the new proposed law: