KANSAS CITY, Mo. -- There are more payday loan stores in Missouri than the number of McDonald's and Starbucks combined. A ballot initiative to reign in payday lenders is now gaining traction.
The non-profit group Communities Creating Opportunity is helping establish a fair community credit agency in Kansas City. It would compete with payday lenders but charge 36 percent interest instead of the triple-digit rates that payday lenders impose.
Elliott Clark volunteers at a food pantry because he says he knows what it's like not to be able to be able to make ends meet. Four years ago, Clark's wife broke her ankle and couldn't work for more than four months. Unable to pay all the of the bills by himself, Clark turned to a payday loan for help. He calls it the worst mistake he could've made.
"Eventually one pay day loan turned into another and then another," Clark said. "In a short time frame, I had a total of five pay day loans, totaling $2500 but not being able to pay them all off at one time, I wound up paying them $30,000 over a three year period. that's in interest."
Clark claims banks aren't interested in making small loans of less than $5,000 which is what he needed at the time. He says payday loans were his only options. Those loans carry an interest rate of 495 percent.
QC Holdings, the largest payday lender in Missouri says if Clark had borrowed from Quik Cash, he only needed to ask for an extended payment plan that would've given him two months to pay off what originally was a two-week loan at no extra cost. QC says it provides credit where otherwise there would be none. It helps customers avoid more expensive bounced check fees that can be equivalent to 3,500 percent interest charges. Still, Clark supports a Missouri ballot initiative that would cap all loans at 36 percent.
"Banks have been making money off of 18 percent interest rates, or 21-27 for years," Clark said. "But these pay day loan companies tell us they can't survive on 36 percent. Yes, you can. Banks have been doing it for a long time. how come you can't?"
Clark says he lost his home to foreclosure while paying off the payday loans. He hopes a new community lender established by non-profits can help fill the need without trapping poor folks in a cycle of debt.
Hundreds of volunteers are circulating petitions calling for the loan cap to be placed on the Missouri ballot in the fall of 2012.