Jacology: Payday Loans

MARYLAND HEIGHTS, MO. (KPLR11.com)— Here's a question, what do you do if you have a lousy credit score; but you need to borrow money? Well, if you live in Armenia or Mongolia or India or a lot of other countries you can use something like KIVA-dot-org. KIVA is a micro-lending site. People agree to make loans. Small borrowers in the third world get loans. Almost 99 percent of borrowers pay the loans back. Interest rates for these micro-loans, usually under a thousand dollars, is anywhere between 15 percent and 35 percent.

Now let's say you live in the United States. Well, you're out of luck unless you want to go to a loan shark on the street or a payday lending company. Those interest rates can run into the dozens, if not hundreds. Because so many working poor people have been gouged by payday loan outfits; a new proposal in Missouri would cap the interest rate you can be charged at 35 percent.

But there's opposition to that. Payday loan outfits and small lenders have banded together into something called stand up Missouri. And stand up Missouri says putting a lid on short-term loan interest would actually hurt poor people by making even these desperation loans unavailable. So stand up Missouri held a rally in Jefferson City Wednesday, speaking out against attempts to regulate pay day lenders.

The head of stand up Missouri is a fellow named Tom Hudgins. But this is more than being public spirited on his part, apparently. That's because Mr. Hudgins, is also a manager of a Missouri finance company that makes small loans to folks with lousy credit. And he says well meaning attempts to limit interest rates end up hurting the people they're supposed to help.