Missouri regulators are weighing whether to stop a practice in the state of allowing payday lenders to collect utility bill payments from customers.

Payday loan companies argue that few utility customers paying their bills also take out a loan. Utilities have defended it as the best and most convenient option for customers.

The debate boiled over at a recent meeting attended by payday lenders, utilities and consumer groups and organized by the Missouri Public Service Commission. The commission’s staff plans to deliver a report with a recommendation on whether to proceed with drafting a rule to ban the practice.

Opponents have argued that it’s ridiculous to collect utility payments at places providing high-interest rate loans that are geared to cash-strapped consumers. Customers pay off their utility bills, opponents say, but may find it too convenient to take out a loan to do so.

John Coffman, an attorney for the Consumers Council of Missouri, said the debate on the practice has simmered for several years but is finally gaining momentum.

While most utility customers pay their bills by mail or online, a small percentage don’t have a bank and must pay in cash. Decades ago, utilities had storefront locations that accepted payments, but those were closed to save money.

KCP&L said 2.6 percent of its customers now use walk-in authorized pay stations, such as grocery and convenience stores. But the utility has an arrangement with eight of those authorized pay stations in Missouri and one in Kansas that offer check-cashing services or payday loans.

The payday loan industry is regularly the target of criticism, not just in Missouri but across the U.S.

Earlier this month, Missouri Gov. Jay Nixon vetoed payday loan legislation, saying it fell far short of the serious reform needed and would still allow the lenders to charge 912.5% for a 14-day loan. The Missouri House in April had passed legislation to eliminate renewals on payday loans and lower the amount of interest borrowers can charge.

QC Holdings, one of the state’s largest payday lenders, wrote in a letter to state regulators that accepting utility bill payments and offering short-term loans are separate transactions.

The company contends that few utility bill payment customers took out payday loans and said that the $1 average fee collected for each utility payment doesn’t cover the cost of handling the payments.

Read more here: http://www.kansascity.com/news/business/article756804.html#storylink=cpy 

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