March 26, 2008 08:41 PM UTC

Payday Lending Reform Looks Likely to Pass

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• by: Colorado Pols

As the Denver Post reports:

The Senate gave initial approval Tuesday to a bill tightening regulations on payday loans despite Republican objections that it was “economic paternalism.”

Supporters of House Bill 1310, which would cap interest rates on payday loans at 45 percent and limit other fees on the transactions, said the legislation would protect consumers.

“The practice we’re talking about is usury,” said Senate President Peter Groff, D-Denver. “Going back to biblical times, governments have tried to deal with this immoral practice.

“It was wrong back in biblical times, and it’s wrong today.”

But Sen. Shawn Mitchell, R-Broomfield, and other Republicans said the bill ultimately would hurt consumers by limiting their borrowing options.

He said the bill was “economic paternalism” on the part of government.

The bill also prohibits short-term lenders from knowingly lending money to someone who already has a payday loan, though it’s unclear how lenders might know that.

Sen. Moe Keller, D-Wheat Ridge, said that provision is needed because too many payday borrowers extend their loans time and time again or take out multiple loans, spiraling further into debt. “Then it’s no longer a choice, it’s a trap,” Keller said.

We discussed previously how this bill has emerged as the hot-button issue of the legislative session, with intense lobbying against passage by the payday lending industry and Republicans uniformly crying shame. Despite that opposition, it’s done well and survived the process relatively intact. We’ve heard Governor Ritter will sign the bill if it reaches his desk, which looks increasingly likely.