FOX 31’s Tammy Vigil reports on the last-minute giveaway to subprime personal lenders that passed the General Assembly with distressing bipartisan support–at least in the Democratic-controlled House–and is now headed to the Governor’s desk, where consumer advocates hope it will be vetoed:
Only the Governor can save consumers now.
House Bill 1390 raises interest rates on personal consumer loans by up to 71 percent. It would allow lenders to raise finance rates from 21 percent to 36 percent on loans up to $3,000.
It also increases rates from 15 to 21 percent on loans more than $3,000 to $5,000.
These loans target people with some credit problems who can’t get loans from traditional banks and credit unions to buy consumer products like cars, boats and to consolidate debt…
As we discussed yesterday, House Bill 15-1390 would dramatically increase the maximum allowable interest rate on the specific types of personal loans offered by subprime lenders like Citigroup’s OneMain Financial and Springleaf Financial. Not surprisingly, lobbyists for these corporations were the driving force behind this legislation, and successfully prevailed on Democratic leadership in the House to allow the bill to be introduced late last week. Asked to defend the legislation yesterday by FOX 31, House sponsor Rep. Jovan Melton (D) made a disappointingly unconvincing argument:
“It is high risk. It has a higher interest rate of 36 percent, but it’s much better than 125 percent we see with pay day lending facilities,” said State Rep. Jovan Melton, a Democrat from Aurora.
He also said these lenders need a hand to stay in business in our state… [Pols emphasis]
The claim that these lenders need to be able to hike interest rates in order to “stay in business” is plainly contradicted by the huge success they are enjoying in Colorado today–in 2013 alone, millions of dollars in profits on over 31,000 loans of the type that would be affected by the legislation. Sure, 36% is a lower interest rate than payday loans, but the current rate caps are not hurting these lenders’ business. It is therefore completely disingenuous to claim that we must let them inflate the cost of loans they issue to consumers by almost 40% in order to “keep them in business.”
In fact, that’s the same nonsense we heard from the payday lending lobbyists and their political surrogates back in 2010, when legislation reforming that industry’s over-the-top usurious practices was signed into law. Five years later, surprise! You can still get a payday loan in Colorado with ease.
Bottom line: this was a major political mistake for Democrats who backed indefensible anti-consumer legislation, and another lesson about the constant vigilance needed at the Capitol to protect citizens from predatory corporate lobbyists. The last-minute rush to pass this bill was obviously meant to limit debate and public knowledge of what was happening, and that was a terrible decision by Democrats who should know better.
And now that the media is cluing in to what happened, it’s time for some mea culpas–and a swift veto by Gov. John Hickenlooper.