By Tom Hudgins, Chairman and CEO of Stand Up Missouri
Jim Sahaida recently appeared in a segment of I'm Just Sayin', in which he encourages Missourians to support an effort to cap interest rates at 36%. His argument is a popular one among the supporters of this effort, but it offers nothing more than misleading statistics, meant to stir up a hornet's nest and distract people from the real issues. It's a fool's-gold solution that will only create problems around consumer debt. Consumers currently have many choices when they need to borrow money for those times in life when the funds just aren't there. Mr. Sahaida's solution would take away all small-dollar borrowing options currently available to consumers, and thus take away the choices that Missourians rely on to meet emergencies and handle important financial needs.
One of the choices that would be taken away by Mr. Sahaida is the traditional installment loan. These loans are a safe, affordable alternative in the marketplace and fill a great need in Missouri today. These loans require proof of income and are structured with installment payments to ensure that the loan can be paid back manageably over time. People struggling with financial issues need access to safe, affordable loans to help them work their way out of debt. Traditional installment loans fill that need and are the safest options for Missourians in times of financial need. Yet the Payday Ballot Initiative to cap rates would wipe out all small-dollar loans, including these traditional loans-leaving consumers with severely limited and undesirable borrowing options. It is neither wise nor necessary to do that.
Capping interest rates and eliminating traditional consumer installment loans in the process will only push consumers into even more desperate straits, while making lending even more difficult to regulate. Please do not be fooled by this smoke-and-mirrors solution. If asked to support the Payday Ballot Initiative, just say "No, Thank you."
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