The brewing controversy over proposed new rules from Attorney General John Suthers governing the payday lending industry takes an ominous turn today, with new details reported by the Grand Junction Sentinel’s Charles Ashby:
Under the old law, those fees and rates could amount to as much as 520 percent per year. The new law limits fees to $7.50 a month for every $100 loaned, and an interest rate of no more than 45 percent.
In a letter to Attorney General John Suthers’ office this week, [Ritter administration attorney Craig] Welling said one rule could result in fees and rates far higher than allowed under the old law.
“A borrower who repaid a loan … would pay a $60 nonrefundable finance charge (on a $300, two-week loan) as well as $5.19 in prorated interest, for a total 565 percent annual percentage rate,” Welling wrote.
“Increasing the annual percentage rate from 520 percent to 565 percent would frustrate legislative intent to the point of absurdity.” [Pols emphasis]
To recap, the Sentinel reported over a week ago that Suthers accepted north of $10,000 from various donors tied to the payday lending industry at the same time his office was drafting new rules governing payday lending–rules mandated by the passage in the legislature this year of House Bill 1351, a long-sought reform bill of this predatory (and spammy) industry.
It’s not illegal for Suthers to take donations from an industry he’s regulating, but the timing of the donations, and the fact that Suthers had never received significant amounts of money from payday lenders before this time, raises very straightforward conflict-of-interest questions.
But we’ve said from the first report on this controversy that the real problem for Suthers would come with specifics about his proposed rules that appeared to favor the payday lenders who made these donations. This article does note an objection from payday lenders to the proposed rules–apparently they’re obligated to recommend other lenders if they cannot offer certain payment terms to customers. Something tells us that’s not as big a deal as payday lenders being able to charge more money now than they could before payday lending reform legislation passed.
No, the question of whose bread got buttered here–or mutually so–is getting kind of urgent.