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Missouri Payday Loan Laws and What Happens When You Can't Repay Them

  • by Lyle Solomon|
  • 0 Comment |
  • Updated: December 31, 2021 |
  • Loan Laws


Payday loans are one of the fastest ways to get cash at short notice. Whether you have to pay for emergency expenses or don't have enough to pay for your essentials, your best bet is to get a payday loan. However, these payday loans are only worth taking out when you have the money to pay them back. Payday loan settlements can get very hectic as lenders will try every tactic at their disposal to recoup their loan.

Getting payday loans can leave you taking one out, failing to pay it back, and racking up interest. The state of Missouri recognizes payday loan providers as legitimate businesses. Not only are they legitimate in the state, but they have managed to flourish here for almost two decades.

Here's an overview of the payday loan laws in Missouri, their regulations, and what happens when you cannot repay them.

Missouri Payday Loans and Regulations

Missouri has some of the softest laws concerning payday loans throughout the United States. Thanks to their lenient laws, payday loans have been able to thrive. Of course, there are some limitations on payday lenders through various regulations.

License Requirement

Payday lenders are legal entities throughout the state thanks to Mo. Rev. Stat. 408.500 et seq. Therefore, they can perform their operations as long as they have a license, courtesy of Missouri's Division of Finance.

Lenders must display their license front and center. Information about the lender and their business should accompany their license. Moreover, according to 20 CSR 1140-11.030 (2), the lender will also provide the Division of Finance. This information can include the phone, address, and name of the government entity.

Copy of Agreement Laws

Provision 20 CSR 1140-11.030 (5) states that the lender must provide the borrower a copy of the agreement. This agreement will contain all the relevant information about their payday lending transactions.

The copy of the transaction will also include a list of the terms and conditions for the short-term loan. The borrower will have to read through the entire agreement carefully and then sign it if they agree. Customers also hold the right to cancel the contract by the next business day's end, and there will be no extra charge.

Charges and Interest Rate Laws

Provision 408.500.4 clearly states that the lender must provide the borrower with clear information about their interest rates. But other than their interest rates, they will also have to make clear the short-term nature of the loans. Lenders will also have to provide information about lending transactions to the borrower to make an educated decision.

Keeping Information and Ledgers

20 CSR 1140-11.040 (2), 20 CSR 1140-11.040 (3), and 20 CSR 1140-11.040 (4), are all laws that force lenders to keep a record of their transactions. These records can include an individual account ledger, a profit and loss statement, a trial balance sheet, a general ledger, and a cash journal.

20 CSR 1140-11.040 (5) states that they will have to maintain these records. It also allows the examiner to access them on short notice.

20 CSR 1140-11.040 (6) prohibits lenders from deleting individual account ledgers. And 20 CSR 1140-11.040 (8) forces them to provide borrowers with paid notes for their transactions.

Ceasing Operations and Shutting Down

Before a payday lender can cease their operations, they will have to provide an official statement to the Division of Finance. More importantly, they will have to inform the division at least ten days before shutting down.

Before they finally close down, the company must hand in their license along with a letter that explains their decisions. The Division of Finance will also receive a list of the remaining receivables and their current locations.

Loan Amount

408.500.1 Specifically states that the company's payday loans cannot exceed $500. They can either be $500 or less. While they can only provide a single loan at a time to borrowers, they can charge fees and interest as they please.

The Mo. Rev. Stat. 408.500 et seq bill received various amendments in 2006. One of the significant changes that came with the new bill was the inclusion of 6 roll-overs. Borrowers will receive a total of 6 roll-overs from their lenders, as long as they reduce the principal amount of the agreement by 5%.

Fees, Interest, and Maximum Term

Both interest and fees cannot exceed 75% of the initial amount, according to 408.505.3. Therefore, interest and other fees cannot exceed this percentage throughout the payday loan life.

Due to this law, Missouri has the highest APR throughout the US. In fact, in some cases, the APR rose to 1950%; and in 2019, borrowers had to face an interest rate of 443%. 443% is also the average rate for a payday loan that amounts to $300, according to the Center for Responsible Lending.

The maximum term for any payday loan can range between 14 and 31 days in Missouri. If the borrower does not pay them back, they will be subject to various fees and interest charges.

Specific Cases for Criminal Action against Borrowers

The state allows lenders to take criminal action against clients if they close their accounts before repaying the total amount. Criminal action is also justifiable if they stop payments on their cheque.

What Happens When You Cannot Repay Them

Defaulting on your payday loans can lead to a slew of serious issues, fines, lawsuits, threats, and even a reduced credit score. Now you think this may be a little excessive for just $300; the worst is yet to come.

Payday lenders can be outright ruthless in chasing down their debtors and ensuring that they get their money back. Here is what to expect when you cannot repay your loan from a payday lender.

Threats for Jail Time

Payday lenders cannot send you to jail for not paying them back. It is quite the opposite. Payday lenders cannot threaten their clients into paying them their money. These threats can be about sending borrowers to jail or having them arrested. 408.505.8 protects customers from their threats.

However, most payday lenders still tend to threaten individuals and even go so far as to file criminal complaints against borrowers. They do this by abusing bad-check laws, which judges usually accept without second-guessing.

Fortunately, this is illegal, and there are protections in place to protect customers if they face these charges. The Consumer Financial Protection Bureau has advised borrowers facing these threats to contact the office of their state attorney general. They also insist that the borrower should not miss a day in court, even if the lender wrongly filed the complaint.

The Court Can Summon You

Payday loan companies will go to any length to retrieve their money from you. They can even file a bad check complaint, which can force you to appear in court. While you might think that this is taking things too far, this is routine for them.

But the critical thing to remember here is that you should not miss a court summon. If you fail to appear in court, the judge will make a default judgment in favor of the payday lender. And if that happens to you, the court can start collecting debts from you on behalf of the payday lenders. So even though you could not go to jail before, there is a real possibility of jail time now.

Therefore, whatever you do, do not miss your court summon. Even if they wrongfully implicate you, you can still minimize the damage by showing up in court. You should also contact the attorney general's office before going to court so that they can help you settle the matter.

Opening the Table to Negotiations

Payday lenders do not want to sell your debt to another collections agency. They want you to pay them back as much as you want them to leave you alone. Therefore, they will offer you the chance to negotiate the terms and conditions of their contract. They will also ask you how you would like to pay them back and reach a middle ground.

They will try their best to work towards getting a payment out of you. And the best way that you can deal with it is by telling them that you are considering bankruptcy. The thing is: they cannot pressure you any further now. If you go through with bankruptcy, the payday lender will not get anything. Try to reach an agreement with them where they exhaust your debt and settle the account.

Final Thoughts

Having to take out a payday loan can be a very stressful experience. If you cannot pay back the amount you owe, you will face legal consequences. A personal line of credit in Missouri or an online loan in Missouri are popular alternatives to payday loans to get you the emergency funds you need.


Author Bio:

Attorney Lyle Solomon

Lyle Solomon is a licensed attorney who has been affiliated with law firms in California, Nevada, and Arizona since 1991. As the principal attorney of Oak View Law Group, he gives advice and writes articles to help people solve their debt problems


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