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Proposal May Extend Payment Plans For Payday Loans

SPRINGFIELD, Mo. -- New legislation may change payday loan regulations in Missouri. Last week, the Senate passed a bill that would provide extended payment plans for payday loans.
SPRINGFIELD, Mo. -- Taking a payday loan is often a last resort.

"This is my third time visiting a payday loan," said James Wilkerson. "I needed the money so i know the circumstances it puts me under, so I have to do it anyway."

James Wilkerson said he is taking out a loan to pay for bills and repairs for his truck.

"I can't get to work if my car doesn't run," he said. "So I have to make sure it gets repaired."

Payday loans provide $500 dollars or less, with paychecks as collateral. According to the Missouri State Finance Division, the average interest rate of a payday loan is 454-percent. Borrowers can then pay loans off when they are due or agree to additional fees for an extension. State legislators are concerned about when borrowers renew loans repeatedly without repaying them.

"The major problem is the debt cycle people get into," said Senator Mike Cunningham (R-Missouri).

Sen. Cunningham is sponsoring a bill to provide extended payment plans for payday loans to provide an extra days to payback a loan, but it would prohibit a lengthy extension. It could not go longer than four paycheck periods.

"The lender shall offer one time a year to every borrower, one time a year they can do that," he said. "Any more than that, not eligible for extended payment plan."

According to the proposal, no additional interest fees are charged if borrowers can't pay the bill during the collection process.

"We don't want to go back to days of borrowing money in an alley from somebody and have to pay back, or get your legs or arms broke. We don't want to force these businesses out," said Cunningham. "But we do think they need to be more regulations and breaking this debt cycle for people."

Many borrowers say the proposals are both good and bad.

"You are borrowing money because you're in a tight spot," said Wilkerson. "So the following week or two, you have to pay the money back, you're still going to be in a tight spot. because miracles don't happen overnight. i think the extended time will help a lot.

"You need to be responsible for own finances, but it kind of helps because if the option is there," said Wilkerson. " You'll keep going for more, if they give you enough rope."

The bill is set to go the House of Representatives. Senator Cunningham said it's likely the bill will pass in the house and will turn into law once Governor Nixon signs it. It may be as early as August when the legislation is enforced.

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