At Stake in the Show Me State: The Availability of Installment Loans?

Earlier this week, the Missouri Supreme Court issued a ruling paving the way for Missouri residents to be able to make a decision with their vote this coming November regarding the long-running issue of small consumer loans and the interest that can be charged on them in the state. This ruling came in response to a petition drive by a consumer finance activist group, which collected enough citizen signatures to qualify their initiative to be placed on the ballot for the fall election.

If voters go ahead and approve the initiative a few months from now, the result will be that the limit on the amount of interest that can be charged on small consumer loans such as cash advances and traditional installment loans will be capped at a fairly modest level. While this may not sound like a problem to the average consumer, the fact is, however, that it could lead to some decidedly negative consequences for Missourians looking for fast emergency financial assistance from a time-honored source.

Despite claims to the contrary by its proponents, it seems apparent that the initiative effectively targets all small-loan lenders, including traditional installment lenders. After all, it asks Missouri voters to limit rates on all types of small-dollar loans, making no distinction between the various forms of monetary help that fall under this category. Installment lenders, who have provided safe, affordable and exceedingly accessible loans throughout this country for over a century, would most likely be impacted more adversely than other lenders by the passage of the initiative, and a realistic scenario is that such an event could lead to the disappearance of traditional installment loans from Missouri altogether.

These already highly regulated loans are quite popular in the state — it is estimated that almost 200,000 Missourians regularly access them. Like other types of small-money loans such as cash advances, installment loans are utilized by people mainly to cover unexpected emergency expenses and urgent bills, but they offer their own unique benefit in that consumers can repay them gradually, in parts over a manageable period of time.

In the end, of course, the voters will have the ultimate say on whether or not the lending ballot measure should be given a thumbs-up. Hopefully, their final decision will not end up being a classic case of “throwing out the baby with the bathwater,” which if the election were held today and the initiative in its present form were approved, it would seemingly be, based on the details of the initiative that have been made available.