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March 24, 2011 08:24 PM UTC

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

  • 8 Comments
  • 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?

Comments

8 thoughts on “Just When You Thought It Was Safe … Payday Lenders Are Back

  1. I’m a little reluctant to ask any questions  

    http://coloradopols.com/showCo

    But did anyone really think the lending industry wouldn’t be back to try and undo everything?  Just like Wall Street coming back now to try and undo what was done during the bailout.  Just like the oil and gas industry trying to undo whatever regulation, restriction or tax they have to deal with.

    Michigan has just decided to give the governor  monarchical power to disband or otherwise displace elected officials at all levels below the state gov’t.  Is this even Constitutional.  The right and their big money backers are on the move.

    1. But you’d have to start hundreds or even thousands.

      You couldn’t just compete on price, unless you were really, really cheap.

      The problem is that consumers of payday loans are not term or price sensitive.  If they were, they woudl try other sources first – and they mostly don’t.

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