Wednesday, March 5, 2008
GROFF CAPS PREDATORY LENDERS
DENVER—Today the Senate Judiciary Committee passed HB-1310, which is designed to stop predatory lenders from unfairly targeting Colorado’s most vulnerable populations.
Sponsored by Senate President Peter Groff (D-Denver), the bill would help people who take out short-term – or payday – loans pay the loan back without getting caught in an endless cycle of debt.
“The dishonest practices of predatory lending are a real and urgent problem in Colorado,” said Groff. “For many people caught in the debt trap, a payday loan can mean total financial ruin for themselves and their families.”
Payday loans are short-term (usually two weeks) and made for a small amount ($300-$500). Payday lenders can charge $60 for a $300 loan for two weeks, resulting in an APR of 521 percent. House Bill 1310 caps annual interest rates at 45% for all payday loans. It also changes current practice on finance charges: the proposed legislation allows lenders to charge a maximum finance fee of $60 one time per twelve months.
After an interest rate cap regulating the industry was abolished in 2000, statistics have spiraled: since 2003, payday loan volume in Colorado has increased 117 percent. Based on average APR, payday loan customers will pay $544 in finance fees on an average $343 loan. And more than 70% of short-term loans went to borrowers with 11 or more loans in the last full year. Excessive fees on payday loans are estimated to cost Colorado working families more than $76 million annually.
“We are taking this bold step to bring some measure of relief to those who would otherwise be taken advantage of by predatory lenders, while still allowing the industry to operate in an already lucrative market,” Groff said. “It’s time these outfits stopped enriching themselves on the backs of Colorado’s most vulnerable citizens.”
The bill next heads to the full Senate for consideration.