A press release from Coloradans to Stop Predatory Payday Loans announces their success reaching the ballot this year with Proposition 111, a measure to cap interest rates on so-called “payday loans” that have been the source of much vexation in Colorado politics in recent years:
The Secretary of State today confirmed that the Campaign to Stop Predatory Payday Lending will be on the November ballot as Proposition 111. This initiative is supported by Coloradans from all walks of life, ranging from military veterans to people working day in and day out address poverty in our communities. If passed, the initiative would reduce the cost from payday loans which carry 200% annual interest.
“We are grateful to people across the state who worked so hard to help provide some relief from financial strain to Colorado working families,” said Meghan Carrier from Together Colorado. “We’ve seen many families fall prey to this never ending debt trap due to unscrupulous fee and ridiculously high interest rates and believe they deserve a better chance to rise out of financial pitfalls and live a dignified life.”
…Payday lenders strip $50 million per year in interest and fees from financially-strapped Coloradans. The average loan lasts 97 days, and some customers need additional loans to cover the interest, spending more than half the year in high-cost debt. The average loan of $392 costs customers an $119 in interest and fees to borrow money for 97 days. With a default rate of 23 percent — almost 1 in 4 loans — many customers face insufficient funds and overdraft fees from lenders’ automatic withdrawl from a customers account without notice, collection efforts, and even bankruptcy for a loan that was supposed to help them through a shortfall.
“Payday lenders have preyed on some of Colorado’s most vulnerable families and they should follow the same usury laws that everyone else plays by,” said Corrine Rivera Fowler. “Colorado consumers now have the chance to protect themselves and loved ones from the debt traps established by payday lenders when they charge 200% in interest rates and take money directly from a customer’s bank account without notice.”
Payday loans have been a hot button issue in the Colorado legislature ever since an exemption to the state’s usury laws was carved out to legalize them back in 2000. In 2010, a significant reform of the industry was passed by the Colorado General Assembly, changing the loan’s crushing two-week repayment terms term into a six-month loan, but effective interest rates on these loans can still exceed an eye-popping 200%.
Longtime readers will recall that the loan shark industry lavished money and lobbying hours in the fight to prevent even those basic reforms, and politicians on both sides in the legislature have tried to roll back reform on behalf of the industry in ways both overt and sneaky ever since. Colorado would join a significant number of states and the District of Columbia in capping these rates at 36% inclusive of fees if Proposition 111 succeeds.
Longtime readers also know that repeated attacks by payday lending spammers on this blog have left us with little love for this industry in addition to the factual and moral arguments against payday loan sharks. We’d be happy to see this unscrupulous industry’s exemption from Colorado’s usury laws ended once and for all.