May 06, 2011 01:35 AM UTC

"Payday Payback" Killed

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• by: Colorado Pols

UPDATE #2: Once more, for the record, here are the votes for the Payday Lending bill in the State House, where it passed on March 31 before ultimately being killed in the Senate yesterday. Democrats Ed Casso and Sue Schafer were also co-sponsors of the legislation.

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UPDATE: Statement from the opponent coalition group, Coloradans for Payday Lending Reform after the jump. Says Rich Jones of The Bell Policy Center, “The two week, triple digit interest rate payday loan that traps so many borrowers in debt is gone from Colorado, and today we made sure these protections remain.”

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Earlier today, Democrats on the Senate Local Government Committee killed House Bill 1290–the so-called “payday payback” bill that would have increased fees on many payday loan borrowers, significantly undermining last year’s reform of the industry. Following last year’s legislation, a one-time “origination fee” on payday loans was made refundable on a pro rata basis if the borrower paid off the loan early. If passed, this bill would have pushed annualized interest rates on many payday loans back into eye-popping 300% territory, by allowing payday lenders to keep the full amount of the fee regardless of how quickly the loan was repaid.

The three Democrats on the Local Government Committee, Sens. Joyce Foster, Jeanne Nicholson, and Irene Aguilar, were unswayed by testimony from payday lenders, or arguments from sponsor Sen. Rollie Heath, that payday lenders were unduly suffering from the loss of these millions of dollars in additional profits. After the breakneck speed at which this bill raced through the House, opponents were very concerned that the wheels had been greased for passage by the payday lending industry’s top-shelf lobbyists. It’s worth remembering the many tens of thousands of dollars donated by the payday lending industry to key state legislative Republican 527s in the last election cycle. Putting aside Sen. Heath’s sponsorship of the bill, there’s plenty right there to explain the GOP-controlled House’s willingness to be so accommodating.

Unfortunately for them, three women in the Democratic Senate proved much less so.

Consumer Coalition Prevails Against Payday Lending Industry

Sixty-Four organizations preserve regulations that will benefit

an estimated 200,000 Coloradans annually

BILL TO UNDO PAYDAY LENDING REFORM DIES IN COMMITTEE!

House Bill 11-1290,  which would’ve increased payday lending fees and interest significantly, was voted down by the Senate Local Government Committee today.

Today we have won a significant victory against predatory lending! We were able to protect the legislation that we passed last year which has helped end the cycle of debt for so many hard-working Coloradans struggling to make ends meet.

Payday loans can still be paid back in six months, rather than two weeks, with no penalty for prepayment.   “Borrowers have a reasonable amount of time to pay back their loan without the two week time bomb constantly ticking, forcing them to take loan after loan,” said Corrine Fowler from the Colorado Progressive Coalition.

The fee structure created in 2010 with a six month loan term and 45% APR, a finance charge and monthly processing fee was preserved and efforts by the payday lending industry to raise interest rates by as much as 235% did not prevail. The borrower can pay back the loan at any time during the six month period and pay only the fees and interest due.  Borrowers are paying 67% less in fees on a $300 loan than they paid prior to the 2010 legislation.  

For the past decade payday loans created black holes of debt for thousands of Coloradans. By protecting the 2010 legislation hardworking Colorado families have access to emergency cash that includes both a more reasonable interest rate and realistic loan term.  “The two week, triple digit interest rate payday loan that traps so many borrowers in debt is gone from Colorado, and today we made sure these protections remain,” said Rich Jones of The Bell Policy Center.

“Despite the desperate and aggressive efforts of payday lending industry lobbyists, progressive advocates engaged the community for months to ensure that our Senators understood the implications of HB 1290.  We thank each and every member of the General Assembly who listened to their constituents and stood up against the industry lobbyists and for this important consumer protection measure,” said Corrine Fowler from the Colorado Progressive Coalition.