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May 03, 2010 07:43 PM UTC

Payday Loan Passes Senate, Despite GOP Fears We're Welcoming the Mob

  • 4 Comments
  • by: jaytee

( – promoted by Colorado Pols)

Payday regulation passed the Senate and is headed back to the House for reconciliation. Sponsor Ferrandino is confident it will pass and cautiously optimistic that the bill will succeed in ending the worst of the dread payday gouging and abuse.

The Colorado Independent reports that the debate last week featured a gem by GOP Sen Al White, who thought regulation would kill the industry, which would bring in the mob to serve the payday customers, which would end in the literal beating if not killing of debtors. Talk about a job killer!

White:

“If we pass this bill, we are inviting organized crime into Colorado…. Organized crime makes these loans and you know how they collect? They send Willie the Enforcer out to your house, and Willie the Enforcer is not satisfied with a post-dated check.”

Ferrandino:

“The bill’s obviously weaker than the original version, but I think it gets us to where I want to be. It is a much more complicated bill now, so the question is Will the industry find loopholes within the law? I think the intent of the bill is clear, but do they find loopholes?

“I think the way the Senate looked at it, and I was part of that discussion, was really to allow the consumer the power to decide how long the loan would be and make sure they don’t get caught inside the cycle of debt. We’ll see by next year if it doesn’t work out as intended.”

   

Too bad this legislative session is coming to an end!

Comments

4 thoughts on “Payday Loan Passes Senate, Despite GOP Fears We’re Welcoming the Mob

  1. Loanshaorks never charged intrest at 540% per year.

    Payday loan people simply sick collections, and law suits with garnishments in the direction of people who default.

    It’s a speciaous argument.

  2. I introduced House Bill 1351 to deal with the cycle of debt that so many people find themselves in when they take out payday loans.  

    According to the Attorney General almost 50% of all loans go to people who had 12 or more loans out in the last 12 months.  In addition, a study from Vanderbilt shows that a person who takes out a payday loan is twice as likely to file for bankruptcy as a person in the same financial situation who does not take out a loan.  

    Facts like these lead many to conclude that payday loans did not provide access to credit, but provided access to debt, and this was not acceptable.  

    And after talking to some people who have been victimized by the payday loan industry, I became determined to scale back the abuses of this predatory practice.

    Originally, HB 1351 capped all fees and interest on payday loans at 36%, the same rate that the US Department of Defense caps the rate for military families.  While that proposal could not gain enough support in the House and Senate, many groups and legislators worked on changes to the legislation that would be acceptable, while still solving the cycle of debt and reining in the industry.

    The legislature has been swamped with payday loan lobbyists:  not just  the well-heeled professional team of 15 paid lobbyists, but also the throngs of staffers from the payday shops themselves who have been paid to come down and lobby for their bosses.

    After hours of conversations and negotiations a solution was found that will put consumers in the driver seat..  The following are key provisions of the legislation as passed by the Senate:

    • Maximum loan amount at $500 (same as existing law)

    • Minimum 6 month term on the loan ( currently no minimum)

    • Application fee of $20 per hundred for first $300, and $7.50 per hundred for last $200 ( same as current fees on payday loans)

    • 45% interest rate on the loan

    • Monthly service charge of $7.50 per hundred with a maximum of $30

    • Allow customers to prepay loan without any penalty

    By extended the term of the loans we are allowing customers to control their own financial situation.  

    The average borrower in 2009 paid $476 in fees on a $367 loan and took out roughly 8 loans for a loan term of just about 4.5 months.  Under this bill, the same borrower would only need to take out 1 loan, and would pay $189, a 60% reduction in the cost of the loan.  However, the borrower could avoid some of the fees by paying off the loan earlier, giving them the control of their financial situation.

    HB 1351 will be a strong step in helping consumers get access to real credit and ending the most predatory practices of payday loans..  The bill still has one vote by the House to concur with the Senate version, but if that approved this will be a significant change in our state that will ensure people have access to real credit and not access to a debt trap.

    Mark Ferrandino

    State Representative

    House District 2

    1. on Saturday at a meet and greet with Karen Stockley for HD 49. I can’t tell you how proud I am of you personally for what you’ve done here. And for record and to my great delight, Stockley said if she were a member of the House, she would have voted for you bill.

      Thank you for this.  

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