28 Nov Why the payday loan industry is declining in Missouri?

The Payday Loan Industry In Missouri Appears To Be Dropping, But Why?

Regulatory agencies and lawmakers are always closely monitoring and imposing new rules on the financial industry, and one of the most closely monitored areas in finance are payday loans and their cousins known as installment and car title loans. Most payday loans are regulated by state governments, some of which have outlawed them altogether while others have put tight restrictions on them. Even in many states that currently allow payday loans, legislators are reviewing bills that would either make them illegal or very difficult to operate. Yet for the State of Missouri, it may be unnecessary to look into payday loan restrictions that city officials in Columbia are looking into because reports are that payday loans are declining already.

The Recent Data On Missouri

According to data graphs and a report found in the St. Louis Post-Dispatch newspaper, payday loan stores operating have been just about cut in half from 2005 to the present day as the number of known licensed stores in 2005 was 1,335, and the number of stores today is 653. Now what was also discovered was that installment loan companies were increasing during that time from a little over 200 to now having near 1,000, yet the number of these stores seems to have peaked around 2013 and has shown a slight decline since. The factors playing into this are all unknown, but

different spokespeople for payday lending have offered their own speculation on them.

Some Blame The Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau has always been a known enemy of payday lending agencies and has organized campaigns against them over the years. Just this last year they came out with another proposed federal regulation that would make it much more difficult for consumers to obtain a payday loan without proving they could pay it back when they’re supposed to and would potentially end rollovers. Many lenders have said these new rules would put many smaller locally-owned Missouri lenders out of business because their customer base would shrink so dramatically from not being able to qualify under these regulations. Even large payday chains have started to close up shop in some locations even though the rules haven’t yet gone into effect. Some have sought relief by changing their business to installment lending, but this has also cut off large amounts of consumers looking for less than $500 in loans, and it comes with large costs to lenders.

Some Say It’s The Rise In Online Lending

What the charts on these graphs in the St. Louis Post-Dispatch accounted for was brick-and-mortar payday lending stores operating, but it didn’t mention the internet-run payday loan companies, though some brick-and-mortar companies do offer online services as well. But it makes sense that consumers would now look online when they need a quick loan to save time and money from having to drive or even walk to the nearest payday loan store. Plus there’s a greater number of options available and consumers can find lenders that have the most favorable interest rates or the exact amounts in loans that they need. In fact the Post-Dispatch did mention that since 2012 there does seem to have been a growth in online-only licensed lenders in Missouri.

There Seems To Be More Consumer Awareness As Well As Alternative Products

In a day and age in which more information than ever can be found on payday loans, consumers can very quickly find out about high interest rates and the risks that come with taking out a payday loan. While some people may feel they have no choice, it’s still possible they’ll try to find a better loan option before turning to a payday loan. And there actually are other options including in Missouri where people can find small dollar loans that are better than payday loans. Many credit unions like Mazuma Credit Union, which is based in Kansas City are also offering small dollar loans for customers who need emergency loans. And even where such credit unions are not found, sometimes consumers apply for small credit line credit cards which not only meet their needs but also help them repair their credit scores.

To sum it all up, there likely is not any one reason why traditional payday loan stores have seen a decline. Many are saying it’s just not worth the profits it once was and while the regulatory agencies may be doing their part, researchers really believe there has been a shift in the markets as well as some consumers just simply not borrowing as they did prior to the 2008 recession. One thing is for sure that payday loan advocates still believe there’s a great need for their services especially for lower-income or bad-credit borrowers.