March 24, 2011 08:24 PM UTC

Just When You Thought It Was Safe ... Payday Lenders Are Back

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• by: TheBell

(Not on our watch, payday lending spammers – promoted by Colorado Pols)

Payday lenders are trooping back to the General Assembly, lining up lobbyists and scheming to put the bite back into payday loans.

It was only last year that Colorado legislators came together to reform payday lending, and it was hailed as one of the signature achievements of the 2010 session. Lawmakers  produced a workable, common-sense solution — the costs are still high, but people have a reasonable chance of paying loans back on time.

But all those excessive, damaging fees paid by repeat borrowers add up — about $80 million a year before the reforms. That’s a lot of money to leave on the table.

Never mind that the reforms are working and that borrowers are having an easier time paying off their loans.

The industry is coming back with a “technical amendment,” but there is nothing technical about it. This new bill would gut last year’s reforms by making the origination fees non-refundable. This almost surely would increase costs and could turn the loans back into repeat products that can be churned. Once again, there would be a financial incentive for lenders to trap borrowers in a cycle of debt.

A year later, this should be an easy one for lawmakers. It’s straight-up consumer protection, and if the Great Recession has taught us anything, it should be that trapping borrowers  with easy credit and dangerous loans is bad for people and the economy.

The reforms have been in place since August 31 (and fully implemented only in November), and consumers say they can manage the six-month payback period. And note that the industry didn’t dry up and blow away. In fact, the CEO of EZ Pawn, one of the national chains, told investors, “We are frankly happy, very happy with what is going on” in Colorado.

So, why undo last year’s reforms? It’s been only a few months, after all, and the effects are positive and good for Colorado.

It can’t be just about the money, can it? Not hurting people, not stripping wealth from low-income communities, making the economy stronger for all of us — that has to count for something, doesn’t it?