Only reliable financial news

Despite its name, the Airport Currency Exchange, a bare-bones operation across Interstate 70 from Lambert International Airport, doesn’t trade in euros, pesos or British pounds.

Instead, you can pay your electric, gas and phone bills there. And if you’re short on funds, the exchange can give you a short-term, high-interest loan. Missouri’s Public Counsel wants that to end.

The state’s consumer advocate for utility issues is hoping to prevent payday loan stores from doubling as utility payment centers.

In a recent filing with utility regulators, the Public Counsel asked for sweeping changes in billing and payment practices that include eliminating various payment fees. The proposal also would require utilities to open company-run payment centers and end the relationship between utilities and payday lenders.

Deputy General Counsel Mike Dandino said customers who most often used payday loan services were poor, elderly or living paycheck to paycheck. Many of the same customers either face threats of disconnection or have fallen behind on bills, making them easy targets for high-interest loans.

"It is not in the interest of consumers to have utility companies steer customers to these predatory lenders," Dandino said in the filing.

The Public Service Commission has yet to act on the petition. If the five-member commission decides to go ahead with a formal rule-making process, it would takes months and involve taking public comments and a hearing.

The recommendations are sure to draw stiff opposition from AmerenUE, Laclede and AT&T. They say that opening and operating payment centers across the area would be too expensive and that eliminating other payment sites would mean a loss of convenience for customers who may have to travel farther to pay their bills.

Richard J. Mark, senior vice president of energy delivery at AmerenUE, said the utility tried to provide customers as many options as possible, including payment centers spread across its 25,000-square-mile service area.

Eliminating even some of those options could especially hurt customers in rural areas and those who need to pay bills immediately to avoid disconnection, he said.

"By eliminating options, you really create hardships for customers," Mark said in an interview.

Nationally and in Missouri, payday loan stores have drawn increased scrutiny from regulators and consumer groups in recent years.

In 2007, the National Consumer Law Center, a nonprofit consumer advocacy group, urged regulators to end the relationship. The group said the added convenience of having more locations to pay bills was outweighed by steering vulnerable customers into the hands of those pitching high-interest loans.

Payday loans are generally defined as short-term cash advances usually secured by a post-dated personal check. In Missouri, the maximum loan is $500 and interest charges can’t total more than 75 percent of the principal.

Still, the average interest rate on a payday loan in Missouri last year was 431 percent, or $47.95 on the average two-week loan of $231 — a reason the state has been criticized for its lax regulation of payday lenders, at least compared with neighboring states.

"Regulated monopolies and the state PSC should not be a in a position where they’re encouraging the use of these services," said John Coffman, a lawyer and former Missouri Public Counsel who has in the past worked for consumer groups including AARP and Consumer Council of Missouri car loan rates.

The Public Counsel’s proposal doesn’t include evidence that utility customers are taking out high-interest loans to pay their bills; it only suggests that the relationship between utilities and payday lenders makes doing so more convenient.

In fact, prohibiting utility payments at payday loan stores also doesn’t guarantee that a cash-strapped customer won’t take out a high-interest loan and use the proceeds to pay their bill at a supermarket or bank.

About half of AmerenUE and Laclede customers still pay their bills by mail, and only about 10 percent pay in person through a third-party agent. And most of those do so at grocery stores or banks, not payday loan stores, spokesmen said.

Neither utility has a direct relationships with payday lenders. Both companies contract with FirsTech Inc. to recruit and run a network of agents and transmit payments.

Transaction fees at payment centers are capped at $1, and utilities get no part of the money. In fact, AmerenUE and Laclede subsidize the fees received by businesses that serve as payment agents.

The utilities also get no part of convenience fees charged for credit and debit card payments made electronically.

AmerenUE customers who want to pay online or by phone with a credit or debit card are assessed a $3.50 "convenience fee" by Speedpay, the vendor. Laclede similarly offers customers the ability to pay with a credit or debit card through ChoicePay for a $2.95 fee.

Justin Gioia, a Laclede spokesman, said that of the 40 percent of customers who pay their bills electronically, less than 2 percent use the convenience fee option. Only 4 percent of AmerenUE customers pay by credit or debit.

Both utilities offer customers free options for paying bills electronically via check or direct debit.

Regardless, the Public Counsel sees the convenience fees as unnecessary and wants regulators to require utilities to operate company payment centers.

AmerenUE’s Mark said the cost of renting and staffing offices across much of the state for the benefit of a relative few customers who would use them would be expensive and an unfair burden on the rest of the utility’s customers.

Eliminating credit and debit card convenience fees, a piece of which goes to the credit card companies such as Mastercard and Visa, would also mean higher rates for all customers, not just those who use the service, he said.

Meanwhile, AT&T is challenging the accuracy of the Public Counsel’s rule-making petition, which claims the telephone company is charging customers $2.49 if they want to receive a paper copy of their local phone bill.

"AT&T Missouri does not charge customers to receive a paper copy of their AT&T local telephone bill," company spokesman Kerry Hibbs said in an e-mail.

Source

Filed under: economics by Forest