St. Louis Post-Dispatch, March 25, 2014

Ameren Missouri’s largest customer says the utility earned $44.6 million more than legally allowed from October 2012 through September 2013, according to documents unsealed Tuesday.

Noranda Aluminum Holding Corp., which operates a smelter in New Madrid, last month filed a complaint against Ameren with the Missouri Public Service Commission, saying the utility made more money than it was allowed.

The amount, though, was unknown until Tuesday, when administrative law judge Morris Woodruff unsealed confidential documents that accuse Ameren Missouri of earning more than the 9.8 percent return on equity allowed by the PSC.

Noranda also says Ameren should be earning a smaller return on equity. Based on estimates from Greg Meyer, a consultant with Brubaker & Associates in Chesterfield who was hired by Noranda to perform the financial analysis, the utility should only earn a return of 9.4 percent on equity. Adjusting for that, Ameren Missouri earned $67.1 million more than it should have from October 2012 through September 2013.

Along with its overearnings complaint, Noranda is seeking a reduction in its electric rates, warning it may have to lay off 150 to 200 workers at its smelter later this year if it doesn’t get a break. Eventually, the company says it may have to close the plant and lay off the close to 900 people who work there.

If its plant closes, Noranda says rates for other customers will go up because Ameren will lose about 10 percent of its power demand and be forced to sell electricity in other markets for less than the new rate the smelter is asking for.

Noranda wants the commission to reduce the rate it pays Ameren Missouri to 3 cents per kilowatt hour from roughly 4.1 cents per kilowatt hour. The average residential customer pays 10.3 cents a kilowatt hour, Ameren says.

The change could result in other Ameren consumers paying up to 1.8 percent more, Noranda says. Ameren counters a rate cut for Noranda likely would raise rates for other consumers by 2 percent.

The Office of Public Counsel earlier this month asked that documents be made public detailing Noranda’s overearnings allegations. They were redacted because they came from a confidential PSC report, known as a surveillance monitoring report. But the public counsel, which advocates on behalf of ratepayers, argued it was unable to explain Noranda’s complaint to its clients — the public — without knowing more.

Warren Wood, Ameren Missouri’s vice president of legislative and regulatory affairs, acknowledged that the surveillance report data shows the utility overearned by $29.2 million during the 12-month period ended September 2013.

But he said surveillance reports are a poor indicator to determine whether a utility is earning more than allowed because the allowed return is more of an average than a ceiling.

“The expectation is you’ll bounce around that number over time,” he said.

Ameren Missouri has invited the PSC to conduct a “cost of service” study if it is concerned the utility is overcharging customers. Either way, Ameren Missouri plans in July to ask the commission for authority to raise rates, which will trigger a larger rate review study that Ameren said it welcomes.

Wood called Noranda’s overearnings complaint a “distraction” designed to divert attention from the aluminum company’s other case pending in front of the PSC that would lower its rates at the expense of other customers.

Noranda, for its part, says it hasn’t shied from the fact that its proposal might affect household rates. But it has argued that its plant’s closure would hit Ameren customers harder.

“Our rate design proposal is revenue neutral to Ameren,” John Parker, Noranda’s vice president of communications, said. “We’ve been very open about the impact our proposed rate design will have on other consumers.”

Parker also defended the company’s use of the surveillance reports in its overearnings calculations. “There’s a reason the Public Service Commission insists they file these reports quarterly,” he said.

The Missouri Retailers Association, the Consumer Council of Missouri and the AARP have all filed responses with the PSC saying the reports show that Ameren earned more than allowed and should reduce rates.

St. Louis Post-Dispatch, March 8, 2014

To understand the latest dispute between Ameren Missouri and its biggest electricity customer, Noranda Aluminum, think about pie.

Ameren, the investor-owned monopoly utility company, is always hungry. It likes pie.

When Ameren wants to charge more for the electricity you use, it asks the Public Service Commission for more pie. Over the past six years, Ameren has been gluttonously successful in grabbing a 43 percent bigger pie.

When rates go up, the PSC does a couple of important things. First, it sets a profit target for Ameren which the company isn’t supposed to regularly exceed. Second, it divides shares of the pie among all the consumers. Those consumers, from big industrial users of the most power to senior citizens on a fixed income, generally negotiate and come to consensus on which part of the pie they will fund.

The biggest consumers, such as the New Madrid aluminum smelter owned by Noranda, get the lowest rates. Other big manufacturing companies, like Boeing and Anheuser-Busch InBev, also pay less per kilowatt hour. Residential customers pay the most per kilowatt hour because it is less efficient to distribute electricity to individual homes than big manufacturing plants.

Usually, the consumers, big and small, gang up on Ameren to try to make the entire pie smaller.

That context is important in understanding two recent filings with the Public Service Commission by Noranda.
The company, which is owned by private equity giant Apollo Global Management, is asking the PSC to lower its rate, already the lowest rate in the state. Noranda currently pays a little more than 4 cents per kilowatt hour of electricity; it wants to cut that by 25 percent, to 3 cents.

For comparison, the rest of us pay a little more than 7 cents per kilowatt hour. Noranda also wants the PSC to declare that Ameren has been making more money than it is supposed to.

In many ways, the first request is just another case of a big company exerting its oversized influence to obtain a taxpayer (or ratepayer) subsidy. How big? The rate cut would shift about $500 million over 10 years onto the rest of us. For what Ameren calls its typical residential electric customer, that increase could cause a monthly bill of $104.50 to go up by about $2.09.

That doesn’t sound like a lot. But it adds up. So it’s curious that consumer groups aren’t making much noise about Noranda’s rate-cut request.

Joan Bray, executive director of the Consumers Council of Missouri, says this about Noranda: “They have been on the side of consumers.”

Indeed, that’s true. Hence Noranda’s second filing, which accuses Ameren of eating an extra helping of pie.
On behalf of all consumers, Noranda is asking the PSC to determine that Ameren has earned more than the 9.8 percent profit level set during the utility’s last rate case.

Ameren, through its vice president of legislative and regulatory affairs Warren Wood, denies it is taking in more profits than allowed by the PSC.

“The complaint is without merit,” he told us.

OK, then, why won’t Ameren simply open up its books?

That’s what the consumers have been asking them to do for months. It is something Ameren has done previously when accused of overearning, most recently in 2012. In fact, lawyers for parties to Ameren’s most recent rate case already have seen the confidential financial reports that ultimately will determine whether the PSC tries to order Ameren to reduce its rates. It seems highly unlikely that Noranda would file an expensive PSC overearnings case without already knowing the answer it seeks.

In effect, Noranda is asking the PSC to (a) first reduce the overall portion of pie that Ameren gets to eat, and then (b) also reduce the aluminum smelter’s portion of its pie.

The smelter argues it needs a lower rate to compete, pointing to several consecutive quarters of net losses. It says its competitors in other states have obtained even larger rate cuts. Noranda suggests that unless it gets its rate cut, it will have to fire employees or shut down completely.
That argument isn’t without merit, but it’s hard to swallow when Leon Black, the chief executive officer of Apollo, made $546 million last year, more than any other private equity firm boss. Here’s how Crain’s business magazine described his obscene haul:

“Mr. Black’s pay, which was in cash, was about 25 times higher than the amount awarded to Goldman Sachs CEO Lloyd Blankfein or JPMorgan Chase’s Jamie Dimon, who are paid mostly with stock. It is more than double the New York Yankees’ payroll and, for those keeping score at home, 10,702 times more than median household income in the U.S.”

This is the very picture of income inequality in America. For Mr. Black, $546 million wasn’t enough. He needs to squeeze a few more pennies out of grandma next year or he’s going to take his aluminum smelter and go home.

It’s distasteful. And, yet, without Noranda, who keeps Ameren’s runaway greed in check?

Our hope is that the PSC dials back the gluttony of both behemoths.

Save some pie for grandma.

Mother Jones, March 17, 2014

The Consumer Financial Protection Bureau (CFPB), the watchdog agency conceived of and established by Sen. Elizabeth Warren (D-MA) in the wake of the financial crisis, had a hard time getting on its feet. The GOP tried everything it could to hobble the bureau, but to no avail. Over the past couple of years, the CFPB has issued dozens of protections shielding consumers from shady practices by mortgage lenders, student loan servicers and credit card companies. Here are ten things the CFPB, which was created in 2011, has done to protect the little guy:

1. Mortgage lenders can no longer push you into a high-priced loan: Until recently, lenders were allowed to direct borrowers toward high-interest loans, which are more profitable for lenders, even if they qualified for a lower-cost mortgage — a practice that helped lead to the financial crisis. In early 2013, the CFPB issued a rule that effectively ends this conflict of interest.

2. New homeowners are less likely to be hit by foreclosure: In the lead-up to the financial crisis, lenders also sold Americans “no doc” mortgages that didn’t require borrowers to provide proof of income, assets or employment. Last May, the bureau clamped down on this type of irresponsible lending, forcing mortgage lenders to verify borrowers’ ability to repay.

3. If you are delinquent on your mortgage payments, loan servicers have to try harder to help you avoid foreclosure: During the housing crisis, loan servicers — companies that collect payments from borrowers — were permitted to simultaneously offer a delinquent borrower options to avoid foreclosure while moving to complete that foreclosure. New CFPB rules force servicers to make a good faith effort to keep you out of foreclosure. That’s not all: Loan servicers will now face civil penalties if they don’t provide live customer service, maintain accurate mortgage records and promptly inform borrowers whose loan modification applications are incomplete.

4. Millions of Americans get a low-cost home loan counselor: In January 2013, the CFPB required the vast majority of mortgage lenders to provide applicants with a list of free or low-cost housing counselors who can inform borrowers if they’re being ripped off.

5. Borrowers with high-cost mortgages get an outside eye: Lenders who sell mortgages with high interest rates are now required to have an outside appraiser determine the worth of the house for the borrower. If a borrower is going to be paying sky-high prices for a fixer-upper, at least she’ll know it beforehand.

6. Fly-by-night financial players will be held accountable: Part of the CFPB’s mandate is to oversee debt collectors, payday lenders and other under-regulated financial institutions that profit off low-income Americans. The bureau is preparing new restrictions on debt collectors and considering new regs on payday loan industry. In the meantime, the bureau is cracking down on bad actors individually.

7. Folks scammed by credit card companies get refunds: In October 2012, the CFPB ordered three American Express subsidiaries to pay 250,000 customers $85 million for illegal practices including misleading credit card offerings, age discrimination and excessive late fees. This past September, the CFPB ordered JPMorgan Chase to refund $309 million to more than 2.1 million Americans for charging them for identity theft and fraud monitoring services they didn’t ask for.

8. Student lenders face scrutiny: The CFPB oversees private student loan servicing at big banks to ensure compliance with fair lending laws. In December, the agency announced that it will also start supervising non-bank student loan servicers, which are companies that manage borrowers’ accounts. Many of these servicers have been accused of levying unfair penalty fees and making it hard for borrowers to negotiate an affordable repayment plan.

9. Service members get extra protection: In June, the CFPB ordered US Bank and its non-bank partner Dealers’ Financial Services to refund $6.5 million to service members for failing to disclose fees associated with a military auto loan program. In November, the CFPB ordered the payday lender Cash America to pay up to $14 million for illegally overcharging members of the military.

10. Consumers get a help center: If your bank or lender does anything you think is unfair, the bureau has a division dedicated to fielding consumer complaints. The agency promises to work with companies to try to fix consumers’ problems.

St. Louis Post-Dispatch, March 17, 2014

In theory, disclosing more information about fees was supposed to make 401(k) plans better.

Two years after it imposed sweeping new disclosure rules, though, the Labor Department isn’t sure whether they’re working. Disclosure is helpful only if it is read and understood, and 401(k) documents can be extremely dense.

“Some employers, particularly small businesses, may be having a hard time locating the required fee disclosures when they are embedded in lengthy or complex documents,” Assistant Labor Secretary Phyllis Borzi said last week.

The department proposes adding a roadmap feature, a sort of document on how to read the document. Employers would be told in plain language that they could find investment costs on page 17, recordkeeping fees on page 23, and so on.

Debra Moran, director of Acropolis Retirement Plan Solutions in Chesterfield, believes the roadmap is needed. “I can’t tell you how many (employers) still have no idea what they are paying,” she said. “It’s not being provided in an easy-to-read format that breaks fees down transparently.”

If employers don’t understand all of a plan’s fees, they’re probably not negotiating the best deal, and the cost to employees can be huge. For a 25-year-old worker who puts $5,000 a year into a 401(k) over a 40-year career, the difference between 1 percent and 2 percent in fees amounts to nearly $225,000.

Moran says that Acropolis clients have always received clear fee disclosures, but that companies she visits on sales calls often don’t know if their 401(k) costs are high or low. “Even companies that have 600 to 1,000 employees are struggling with this,” she says. “It shouldn’t be that complicated.”

Ah, but it is. When the Labor Department was writing the current rules, some big 401(k) providers lobbied against a requirement for simple, standard fee disclosure. They have to provide the information, but they don’t have to make it easy to find.

“There are some very simple ways to show people what their fees are, and the Department of Labor requirements don’t go far enough,” says Sean Duggan, a retirement plan consultant at Moneta Group.

The only justification for the current, confusing documentation, Duggan says, is that “someone doesn’t want someone to know what fees are. They want to hide it.”

He says disclosures to individual employees, which the new Labor Department proposal doesn’t address, also should be improved. The opacity of those documents may explain why, according to a survey by the Employee Benefit Research Institute, only 53 percent of 401(k) participants said they had seen a fee disclosure.

Still, both employees and employers have more information than they did before 2012. The new transparency — as imperfect as it is — seems to be driving down fees.

Brooks Herman, head of data and research at 401(k) information firm Brightscope, says average fees fell between 2009 and 2011, when the Labor Department was working on the disclosure rules. Based on a preliminary look at 2012 data, he says they probably also fell after the rules were issued.

“We’re better off than we were five years ago,” Herman said, “and I’m excited to see what round two of fee disclosure brings. I’m hopeful it will be another step in the right direction.”

It shouldn’t be the last step, however. Having embraced the concept of fee transparency, the Labor Department now needs to enforce the companion virtues of simplicity and readability.

David Nicklaus, the writer of this column, Mound City Money, is business columnist at the St. Louis Post-Dispatch.

Senate Bill 694 is Backdoor Boost to Payday Lenders

As people of faith representing hundreds of thousand of signers of the initiative petition to cap interest rates on predatory payday loans In Missouri, a coalition of faith organizations* stands opposed to Senate Bill 694.  From the Torah to the Christian Gospel to Catholic Social Teaching, the teachings of religious traditions are clear: It is immoral to charge triple digit interest on consumer loans.

Click here to see the full statement.

* Communities Creating Opportunity in Kansas City, Metropolitan Congregations United in St. Louis and Missouri Faith Voices statewide

Families Move Up the Economic Ladder

This report outlines our first year collaborations, successes and positive community impact of approximately $1.9 million dollars annually, based on average of $1,200 savings for each family who could otherwise spend on fringe financial services.

BANK-On SAVE-Up St. Louis is the first initiative led by the St. Louis Regional Unbanked Task Force. It is modeled after the successful “Bank On” San Francisco program, which began in 2006 and in its first year brought in over ten thousand new accounts with more than 17 bank and credit union branches participating. The “Bank On” concept is now being replicated throughout the US in 64 cities and 26 states.

The purpose of BANK-On SAVE-Up St. Louis is to provide access to affordable financial services including checking and savings accounts, credit products and financial education. Unbanked and under-banked individuals operate in a mainly cash-based system, missing out on the stabilizing benefits that a checking account can provide.

The Goal of BANK-On SAVE-Up St. Louis is to open accounts for at least 20,000 currently “unbanked” households over the next two years and have at least 80% of those accounts successfully maintained or upgraded and to create opportunities in the community for financial education. We want to help families keep more of their paychecks in order to gain greater financial stability. At present, we have 20 bank partners across the St. Louis region that are helping to remove barriers so that low‐income families can open these accounts.

The Role of Community Partners. Our success rests on our ability to reach unbanked consumers through networks they trust, like employers, places of worship, community based agencies, and local colleges. In addition we will market to consumers where they spend their money and time (grocery stores, gas stations, beauty/barber salons, etc.). Your organization can help connect us with unbanked households looking to take the first step on the road to financial security. As a partner you will have access to marketing materials that you can customize for your own outreach events.

Click HERE to see the full report.

St. Louis American, March 6, 2014

“St. Louis tops the nation in the number of minority households that are either unbanked or under-banked,” St. Louis Treasurer Tishaura O. Jones said Friday morning at an event her office hosted for the St. Louis Regional Unbanked Task Force. “We are also at twice the national average in overall unbanked households. These statistics are alarming, and they demonstrate an urgent need for financial education for our citizens.”

We agree, and we commend Jones for her leadership on this crucial matter. Since the task force started its Bank On Save Up initiative, its 20 member banks have opened 1,615 accounts, 83 percent checking and 17 percent savings, with an average balance of $1,118. The Treasurer’s Office is responsible for half of these newly banked citizens, as more than 800 city employees opened accounts when Jones converted city payroll to mandatory direct deposit. These raw numbers are modest, but the very high account retention rate of these new accounts – nearly 96 percent – is extremely encouraging.

As a personal aside, Jones mentioned she had just signed a contract to buy a house. “I’ve been saving for it,” she said.

We immediately thought of another once-promising young African-American elected official from a powerhouse North St. Louis political family who was much in the news on Friday: former alderman Kacie Starr Triplett, who has admitted to paying $4,450 in mortgage fees (among thousands of dollars in other personal expenses) from her campaign committee’s fund, which is illegal. Clearly, Triplett (and a number of black elected officials who misused campaign funds before her, including former state Senator Robin Wright-Jones and former state Representatives Rodney Hubbard and T.D. El-Amin) needed some of that financial education.

Circuit Attorney Jennifer Joyce is reportedly considering filing charges against Triplett, in addition to the financial penalty levied by the state’s (notoriously weak and toothless) watchdog commission for campaign finance and ethics. Given that the money Triplett spent was paid to her campaign fund willingly by her supporters, we believe that the only direct damage she did was to her own credibility. There is not one public fund or project that was hurt by her misjudgment. Of course, the indirect costs to the community of another discredited African-American elected official’s shameful financial misbehavior are self-evident.

In the hope that the banks on the task force can take a joke, we are reminded of an old wisecrack: A stupid crook robs a bank; a smart crook opens one. The fact is that a former alderman could face criminal charges for spending less than $20,000 in campaign funds on transient needs and wants, while a sitting speaker of the Missouri House of Representatives legally invested $900,000 of his campaign funds to purchase 12,000 shares of bank stock. We do not claim that now former House Speaker Steve Tilley acted criminally in so doing – he is not, in the eyes of Missouri law, a criminal for buying bank shares with campaign funds. This is not to single out Tilley’s opportunism, but to question our state’s woefully inadequate laws concerning political campaigns.

“Simply put, financial literacy is the ability to understand how money works,” Jones said to her fellow task force members. “Financial literacy is about planning for the future. When you know how to manage your money, you can make better choices about your future.”

Our community has a lot to learn about managing money if we are ever going to improve our prospects for the future. And our elected officials had better improve their own financial literacy, not to mention get a more firm grasp on ethics, if they intend to be the caliber of leaders that we need to advocate for more fair and prudent public policy.

A Phony Payday Loan Reform Bill. Because 1,950 Percent Is Not Enough

St. Louis Post-Dispatch, March 5, 2014

When a payday lending “reform” bill sails through the Missouri Senate and the payday lending industry doesn’t scream bloody murder, you can be sure of two things:
One, it’s not really a reform. And two, the working poor are going to take it in the shorts. Again.

Seriously, how much more do these guys want? Already the average payday loan in Missouri is for $306 and carries an annual percentage rate of 455 percent. State law allows the industry to charge interest and fees of as much as 75 percent of the loan’s principal. Borrow $200 and pay back $350, and you’re looking at an APR of 1,950 percent.

That’s not enough?

Well, no. The industry and its lobbyists spread more than $1.6 million on state lawmakers’ campaigns between 2003 and 2012, and the spigot is still on. Last year just two payday companies — QC Holdings and Advance America — contributed $83,600 to various Missouri legislators and party committees. Remember, 2013 wasn’t an election year.

The sponsor of the “reform bill” (Senate Bill 694) that passed the Senate last month, Republican Mike Cunningham of Rogersville, got $2,500 from QC Holdings; he doesn’t run for re-election until 2016.

The big “reform” in the reform bill would prohibit payday lenders from renewing (or “rolling over”) loans, which currently can be done up to six times. Borrowers would instead be eligible for an extended payment plan of up to 120 days. But here’s the beautiful part: The lenders wouldn’t actually have to tell the borrower about the extended payment plan as long as there was a sign on the wall and some brochures lying around.

Also, there’s nothing to prevent a lender from closing out one loan and opening another. Instead of rolling over a loan, the lender can roll it into a new loan. Easy-peasy.

Here’s the even more beautiful part: In return for accepting these onerous “reforms,” payday lenders would no longer be limited to charging a mere 75 percent of the principal in loans and fees. They could charge as much as they want. Borrow $200, pay back $500, $600. Whatever.

People get desperate to keep the lights on or get a water pump repaired so they can get to work, they’ll sign just about anything.

In 2006, then-U.S. Sen. Jim Talent and U.S. Rep. Sam Graves, both Missouri Republicans, co-sponsored an amendment to the 2007 Defense Authorization Bill that was signed into law by President George W. Bush.

The amendment was designed to protect members of the U.S. military from predatory lenders by capping interest rates at an annual rate of 36 percent.

What happened was that payday companies closed up most of their shops outside of military bases, as they did in the 17 states that have imposed 36 percent-or-lower payday loan rates. Instead they opened more stores in states like Missouri.

But soldiers, sailors and residents of those 17 states sometimes need short-term loans. Some lenders have found it possible to make a solid profit lending at a mere 36 percent, enforcing better financial habits on their customers.

Indeed, the Inspector General of the United States Postal Service has proposed putting the post office into the “alternative banking” business. People who deposit their paychecks with the Postal Service would be allowed to take out short-term loans at 28 percent. The post office could wipe out its own debt — and so could its borrowers.

In short, there are real reforms possible in short-term lending. A measure imposing a 36 percent cap could be on the November ballot in Missouri, unless the payday industry subverts it, as happened in 2012.

That so many Missouri lawmakers continue to sell themselves like cheap hookers — OK, expensive hookers — to the payday lending industry is a pox on the entire state. Having read the campaign finance reports, we have little hope that the Missouri House will have the integrity to say no to the Senate’s phony reform bill.

We hope we’re wrong, but in the event it passes, Gov. Jay Nixon must veto it. Someone in Jefferson City should have a little pride.

Weak Payday Loan Bill Would Inhibit Reform in Missouri

The Kansas City Star, February 26, 2014

Contrary to what its backers contend, a bill that sped through the Missouri Senate does almost nothing to protect consumers who resort to payday loans.

Short-term lenders, on the other hand, would benefit considerably from its final passage.

Sponsored by Sen. Mike Cunningham, a Rogersville Republican, Senate Bill 694 bans rollovers — loan renewals accompanied by accumulating interest and fees. Current law permits six rollovers a year. The proposal also requires lenders to offer each borrower once a year an extended payment plan with no additional interest or fees.

Perhaps deliberately, the rollover ban and the extended pay period ignore a central reality of payday lending: The business depends on repeat customers. A report last year by the federal Consumer Financial Protection Bureau found that almost 90 percent of storefront payday loans go to borrowers with seven or more transactions a year.

As is done in other states, lenders in Missouri could adroitly sidestep a rollover ban by having borrowers pay off one loan and immediately take out another. For the chronic payday consumer, a once-a-year extended pay period would provide only a short breather from mounting debt.

In exchange for the appearance of being reined in, lenders would receive something they want: removal of the provision in state law that caps interest and fees at 75 percent of the loan’s original principal.

The current cap amounts to a ridiculously high annual interest rate of more than 1,950 percent and helps to explain why the average annual percentage rate on a payday loan in Missouri is 454 percent, more than 100 percentage points higher than the national average.

Honest reform would lower the annual rate of interest that could be accrued on a loan, not remove even the flimsiest of restrictions.

Records at the Missouri Ethics Commission show three payday loan companies donated a total of $3,000 to Cunningham’s campaign committee at the end of last year. When he filed his bill early this session, the famously vigilant industry offered no significant protest.

The Missouri House should reject the measure just passed by the Senate. It is a gift to the industry disguised as reform, and its passage would make genuine protections much harder to obtain.

Time for Real Loan Reform

Springfield News-Leader, March 2, 2014

A proposed overhaul of Missouri’s payday loan regulations in the General Assembly is a poorly disguised effort to benefit a rich and powerful industry that preys on the poor and powerless.

The legislation, which passed easily out of the Senate last month on its way to the House, would prohibit a borrower from renewing a short-term payday loan. Current law allows such a loan to be renewed up to six times.

But, in a nice turn for the payday lenders, it removes any ceiling on interest charged. Its sponsor, Sen. Mike Cunningham, R-Rogersville, says the interest cap is unnecessary if loans cannot be rolled over.

It all sounds logical — until you add up the realities. Current law caps interest and fees at 75 percent of the loan, which is also limited to $500 and can run only 14-31 days. That translates into an annual interest rate of 1,950 percent for a 14-day loan. Despite already being able to charge interest rates that would make Shylock blush, under Senate Bill 694, the sky’s the limit.

Outlawing rollovers does not really stop borrowers from extending a loan over and over again, eventually owing thousands of times the original amount. With lenders willing to simply make a second loan immediately after paying off the first one (or, based on proudly displayed signs throughout Springfield, another lender happily doing that for a borrower), the new law would effectively remove the existing six rollover limit.

While the bill is presented as a way to reform the current payday loan laws and protect the consumer, it does neither. Instead, it gives this predatory industry what it wants — free rein to rake in outrageous profits.

Consider this: In 2012, there were 934 licensed payday loan lenders in Missouri, with a cap that is among the highest in the country. They made 2.34 million loans (in a state with about 6 million people), with an average value of $306 and an average interest rate of 455 percent. This industry has every reason to protect its multibillion-dollar income.

The payday loan industry has been uncharacteristically quiet about this effort at “reform.” But it has not ignored all such efforts. In fact, in 2012 the industry spent $2 million to fight a successful grass-roots petition drive that would have put true reform on the ballot. Missourians for Responsible Lending collected more than 350,000 signatures for a ballot referendum that would have asked voters to put a 36 percent annual interest rate on the loans. That is the same cap the Military Lending Act imposes on payday, auto, tax-refund and other short-term loans made to members of the armed forces.

The industry — using such misleading names as Missourians for Equal Credit and Stand Up Missouri — cried foul, claiming such a law would destroy their lending business and prevent people who genuinely need a small, short-term loan from receiving one.

With billions in profits on the line, they were ready to spend what it took to stop an effort that was gaining widespread support among voters throughout the state. They succeeded by dragging the petitions through court until the $600,000 raised by Missourians for Responsible Lending was spent and time had run out.

MRL is ready to try again. The group’s initiative petition has been approved, and signatures will soon be collected.

Expect those friendly loan sharks to once again spend whatever it takes to stop them. It will likely be more than it took to get a friendly bill passed in the Senate that would actually make real reform more difficult.

The House, however, can stop this. Our representatives should refuse to be part of this subterfuge.

Instead, the legislature should consider outlawing or strictly regulating payday loans as 11 other states have done.

Missouri Lawmakers Crack Down on Payday Loans by…Eliminating Caps on Interest and Fees?

Fake reform for the payday industry in Missouri.

The Pitch, March 3, 2014

The notoriously despicable payday lending lobby in Missouri has a rich history of savagely fighting any proposed legislation that might eat into the industry’s absurd profit margins. Very surprising, then, that a payday loan reform bill sailed through the Missouri Senate last week.
By “surprising,” I mean, of course, “not surprising at all” because the bill, SB 694, is a not-especially-stealthy Trojan Horse for payday lenders in the state.

It sounds like a good deal at first: The bill would prohibit lenders from extending “rollovers” to borrowers. Rolling over a loan allows borrowers to delay paying off their principal at the expense of accruing the kind of interest and late fees that trap borrowers in cycles of debt.

But that’s an easy fence for lenders to hop. Instead of rolling over loans, they’ll just issue borrowers another loan. So now Borrower X has multiple loans to manage. Oh, and also? Under the proposed legislation, there will no longer be a cap on the interest rate that payday lenders can charge Borrower X for those loans. The previous cap – 75 percent of the principal, which amounts to 1,950 percent APR on a 14-day loan – was a regulation apparently too onerous for the industry.

Given that the payday loan industry has essentially bought off most Missouri legislators – as of 2012, it had spent “more than $1 million over the last decade to influence Missouri state elections…lobbyists and lobbying firms working for the industry have given at least another $648,460 to state campaigns,” according to this report – the success of this fake reform hardly comes as a surprise. The bill now heads to the House. Maybe contact your local representative if you have any concerns about this?

St. Louis American, February 28, 2014

“When we educate and empower people to make better financial choices, we also strengthen our community,” St. Louis Treasurer Tishaura O. Jones said Friday morning at an event her office hosted for the St. Louis Regional Unbanked Task Force at the William J. Harrison Education Center, 3140 Cass Ave.

The task force reported initial progress forged by its coalition of 20 banks with the treasurer’s office and a host of community-based institutions and agencies, which was formed in the wake of the FDIC’s 2011 Unbanked Household Survey. She said the task force has documented 1,600 newly banked people in St. Louis, with a 96 percent retention rate.  The FDIC’s 2011 survey reported that 111,000 households (9.7 percent) in the St. Louis metropolitan area were unbanked, an increase of 2.1 percent from 2009; and 222,000 households (20.1 percent) were under-banked, an increase of 2.7 percent from 2009.

Taskforce Steering Committee member Galen Gondolfi of Justine Peterson, a community-based lender, said the net family savings from these new accounts totals approximately $1.9 million annually, based on average of $1,200 savings for each family.  Gondolfi also said the 96 percent retention rate of new banking customers was more encouraging than the modest raw numbers. Several members of the task force said the reported total was also lower than the actual number of newly banked individuals, because not all participating lenders have reported fully. The Federal Reserve Bank of St. Louis has stepped in to facilitate with ongoing data collection and tabulation.

The treasurer’s office is responsible for fully half of the reported number of newly banked citizens. When Jones moved her staff payroll to mandatory direct deposit, 800 unbanked employees started new accounts to accept payroll deposits, she said.

Active engagement in the task force by participating banks was evident in attendance at the event, when 27 people identified themselves as members of one of the 20 sponsor banks.
Representatives from two of the seven Platinum Sponsor banks, Montgomery Bank and Pulaski Bank, addressed the task force.

Ted Rice of Montgomery Bank said the task force was addressing the concern that “people are spending millions of dollars on fringe financial services and getting no return on their money.”

Thelma Moorehead of Pulaski Bank said that enrolling people who are new to the banking system is a matter of face-to-face interaction and “overcoming objections.” Once enrolled, she said, a community banker needs to offer additional “financial literacy” so that new customers understand the benefits in continuing to use the bank, rather than a payday lender or check-cashing franchise.

Task force co-chair Jacqueline (Jackie) Hutchinson, of People’s Community Action Corporation, described many public forums and events where task force banks interacted with the public, in partnership with her agency, the United Way, Beyond Housing, Grace Hill, the Gateway Classic and People’s Health Centers.  Hutchinson said the task force would be doing more community events with churches and also more outreach via social media. The United Way also will facilitate “train a trainer” sessions in financial literacy with the FDIC.

This year, the task force intends to reach unbanked people before they are old enough to bank. Money Smart Week in St. Louis, April 5-12, will open at the Saint Louis Zoo with activities to teach children the basics of financial literacy.

Jones said she campaigned for treasurer with a message of financial literacy, despite the fact that the office is known to the public almost solely as the agency that controls parking (and issues parking tickets) in the city. But she meant the message.

“Financial literacy means people need to be able to understand how money works,” Jones said, “and use that understanding to plan for the future.”

For more information about the St. Louis Regional Unbanked Task Force atGetBankedNow.org or follow on Twitter @stlunbanked.

Fox 4 News WDAF-TV Kansas City, February 24, 2014

Missouri Gas Energy wants a $23 million rate hike. It says the increase is needed to help with pipeline and service line costs, lines that bring warmth to homes and business.  The energy company says if the Missouri Public Service Commission grants its request, residential customers will pay an extra $2.33 a month.  That’s money some customers believe is not just to build pipelines but to line the pockets of company executives.

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