Payday lenders collecting utility bills might end

The Associated PressJuly 18, 2014 

— Missouri regulators are again considering whether to stop payday lenders from collecting utility bill payments from their customers.

Critics contend cash-strapped customers might be tempted to take out loans to pay the bills and end up paying the high interest rates charged by payday lenders, while utilities argue it's a convenient way for their customers to pay their bills, and payday lenders say few people take out loans to pay their bills, The Kansas City Star reported (http://bit.ly/1kCBY6i ).

The issue has been debated in Missouri for years and came up again at a recent meeting of payday lenders, utilities and consumer groups organized by the Missouri Public Service Commission. The commission's staff is expected to present a report next month with a recommendation on whether the practice should be stopped.

The commission studied the issue in 2009 and 2011 before deciding not to ban the practice.

"We've been fighting this for years, and it's finally getting some momentum," said John Coffman, an attorney for the Consumers Council of Missouri.

Utilities have closed most of their storefront locations, which used to serve customers who paid in cash. KCP&L said 2.6 percent of its customers now use authorized walk-in pay stations, such as at grocery and convenience stores. But the utility also has authorized pay stations at eight check-cashing or payday loan offices in Missouri and one in Kansas.

"We only use one when we have no other way to have a walk-in payment option," said Katie McDonald, a KCP&L spokeswoman. She said no customers have complained about using payday lenders.

The Missouri Energy Development Association, which represents the state's investor-owned electric and natural gas utilities, said in a document filed with state regulators that it would be arbitrary to restrict the payday loan agents without compelling evidence of abusive business practices. And QC Holdings, one of the state's largest payday lenders and speaking on behalf of two others, said in a letter that accepting bill payments and providing loans are two separate transactions. It said the $1 average fee collected for each utility payment doesn't cover the cost of handling the payments.

"We strongly contest the unsupported opinion that payday loan stores are taking advantage of bill pay customers," Matt Wiltanger, vice president of QC Holdings, said in the letter.

But Berta Sailer, co-founder of Operation Breakthrough, a Kansas City social services group, said she hopes regulators stop the practice.

"People who turn to high-interest loans are desperate for money," she said, "especially if they've fallen so far behind on payments that their utilities are turned off."

The Office of the Public Counsel, a state agency that represents consumers on utility issues, also has criticized the practice for years.

Information from: The Kansas City Star, http://www.kcstar.com

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