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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Feb 7, 2012

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Sen. John Lamping (R-MO) proposed a bill that would extend the amount of time payday loan borrowers had to pay off unsecured loans of $500 or less from 31 days to 90 days. This law would make it illegal for payday lenders to rollover loans beyond 90 days.


While the senator’s legislation would target the term limit of payday loans, it fails to address the problem of interest rates that critics often claim is usurious. But Lamping said he would not support a cap, as that would drive payday loan companies away from the state.


“For the most part, the payday loan industry has mostly left those states [who have imposed a cap],” he said, according to The Associated Press. “The industry doesn’t exist in those places.”


Rather, Lamping claims his proposal is a compromise that not only offers protection to borrowers, but also allows lenders to make a profit.


Additionally, the senator’s proposal would come with a limitation of one payday loan per borrower at any given time. In order to enforce this, payday lenders would be required to enter all borrowers’ names into a state database that tracks the borrowing activity of payday loan consumers.


However, not everybody agrees with such a restriction. Gerri Guzman, executive director of the Consumer Rights Coalition, told the AP that the tracking database would invade customers’ privacy.


“Consumers should not be punished for having tough times,” she said. “They should not be trapped or made to feel like criminals.”


This proposal comes out of the hot debate that has recently been orbiting the payday loan industry in Missouri. As an interest rate cap is scheduled to be voted on this year that would restrict this type of financing to 36 percent, groups on both sides have emerged to pitch their views. One of the most prominent, Stand Up Missouri, is backed by industry supporters, and has been successfully infiltrating the media over the past few months.