St. Louis residents who are considering bankruptcy or looking for debt relief may be interested to know that a Missouri senator is pushing to alter the terms of payday loans.

A payday loan is an unsecured loan of $500 or less. Currently, under Missouri law, borrowers must pay off these loans in 31 days. In addition, if these loans are not paid off in 31 days, the borrower can perform a "rollover," which allows the lender to charge even more interest.

The main goal of the senator's proposed legislation is to provide Missouri residents with more time to pay off their payday loans. He is proposing that borrowers not only have 90 days to pay off their payday loans but also that the lenders are no longer allowed to roll over a debt that remains unpaid after 90 days.

In addition to extending the repayment period and limiting lenders' ability to roll over debts, the proposed legislation would require payday loan lenders to enter borrowers' names into a Missouri state database. The goal of this database would be to ensure that no Missouri resident is taking out more than one payday loan at a time.

Although the senator's legislation would not limit interest rates, there is also a proposal for a 2012 ballot measure that would allow residents to cap payday loan interest rates at 36 percent. This is a staggering decrease when one considers that current interest rates on payday loans can escalate higher than 400 percent.

The senator's proposed legislation would potentially allow Missouri residents who are in serious payday loan debt to pay off that debt faster and without it rolling over and compounding at such a high rate. For those in Missouri seeking to stop creditor harassment, this could be a very welcome change.

Source: stltoday.com, "Mo. Senator calls for changes to payday loan laws," Feb. 6, 2012