April 25, 2014 10:37 AM UTC

Pew Study Finds Colorado Has Lowest Payday Loan Costs

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• by: TheBell

The Pew Charitable Trusts has found that Colorado has the lowest cost to borrowers for payday loans among all the 36 states that allow these loans. Pew calculated the average charges and the annual percentage rate (APR) that payday lenders charged for a $300 loan taken out for five months, the national average for loan amount and length of loan.

At $172 and 129 percent APR, Colorado’s loans were the cheapest of all 36 states.

This compares to Texas, the state with the highest fees, where borrowers pay, on average, $701 and 454 percent APR.

In Texas and the other states with higher rate caps, payday lending companies charge borrowers far more for the same $300 loan than in states with lower rate caps. Pew’s research shows that credit is not constrained in states with lower rate caps. Researchers specifically point out that in Colorado, after reforms passed to lower rates and extend the length of payday loans, about half of the payday loans stores closed. But now each remaining store is serving 80 percent more customers and borrowers’ access to credit is “virtually unchanged.”

We are proud of the role the Bell played in advocating for the reforms to payday loans enacted in 2010.  A previous Pew analysis found that Colorado borrowers are saving about $40 million per year as a result of the changes in the law.