PSC Supports Restricting Payday Lenders As Sites for Consumers to Pay Utility Bills

St. Louis Post-Dispatch, September 4, 2014

Missouri utility regulators want to limit the relationship between the companies they regulate and the payday lenders where some customers pay their bills.

A majority of the Missouri Public Service Commission expressed support for a new rule keeping utilities from using payday lenders as “authorized pay stations,” which are locations authorized by a utility to accept bill payments.

“There’s still a long way to go before we have a final rule,” said acting Missouri Public Counsel Dustin Allison, whose office advocates for utility customers before the PSC. “But the commission took a good step today in enhancing consumer protection.”

The commission’s staff last month recommended against a rule keeping payday lenders from acting as payment stations for utilities, concluding it wasn’t clear the PSC had the legal authority to do so.

But chairman Robert Kenney said on Wednesday that restricting utilities’ official use of payday lenders as pay stations is “good policy.”

“I do not think that it’s questionable whether we have the authority to do this or not,” he said.

The PSC still needs to approve an order initiating a rulemaking, which comes with a process of its own that requires further review and public comment. But commissioners’ support for a rule is a reversal from 2011, when they did not act on a proposal to restrict payday lenders as bill payment posts.

“I think we should roll up our sleeves, start drafting a rule and get it in place as soon as possible,” Commissioner Daniel Hall said.

Consumer advocates have railed against the industry for years because of high interest rates and the fees and penalties its short-term loans levy on borrowers in mostly poor neighborhoods. The public counsel’s office had proposed restrictions on the use of payday lenders as payment stations for utilities five years ago, citing concern that utility customers might be lured into a loan while paying their bill.

Utilities often contract with places such as grocery stores to act as bill-payment stations, but relatively few payday lenders are used.

Only four of 247 authorized Ameren Missouri pay stations are payday lenders, according to information submitted to the PSC. Laclede Gas uses five payday lenders out of an authorized payment network of 184, and Missouri American Water said only eight of its pay station locations are at payday lenders, less than 1 percent of its total network.

Laclede and Ameren did not respond to a request for comment, and Missouri American said it would comply with any PSC rules.

But the Missouri Energy Development Association, which represents the state’s for-profit utilities, said in comments submitted to the commission that the PSC had not received any complaints regarding authorized payday loan companies and a rule prohibiting their use as pay stations would amount to “a solution in search of a problem.”

Randy Scherr, executive director of the United Payday Lenders of Missouri, said it’s “a problem that simply does not exist” because his group’s member companies don’t extend loans to borrowers without a checking account.

“Those people who are walking in and cashing a check and paying their bills are doing it because they don’t have a checking account,” Scherr said. “They’re chasing after a ghost here.”

The commission still must decide what language to advance. Kenney endorsed a staff proposal that bars only payments from authorized lenders. The public counsel’s more restrictive proposal would bar payments from all payday lenders to utilities, whether they are authorized by the utilities as pay stations or not.

“At a minimum, they need to prohibit the practice of formally associating, of contracting with payday lenders,” said John Coffman, an attorney for the Consumers Council of Missouri. “When the utility’s logo is on the door, on the wall, I think there’s a sense that this is a safe place to do business.”