Protests as payday loan bill advances
Legislation would cap annual interest rate
March 11, 2008 - 8:44 PM
THE GAZETTE
DENVER - Hundreds of protesters rallied on the Capitol steps Tuesday to oppose a bill they say would kill the paydayloan industry and cost hundreds of Coloradans their jobs.
The protesters were speaking out against HB1310, which would cap the annual interest rate lenders could collect at 45 percent. It would also limit the fees a customer would pay on a loan to $60 and prohibit a borrower from having more than one outstanding loan at a time.
The bill has passed through the House and is scheduled for debate in the Senate today. The bill's sponsor, Rep. Mark Ferrandino, D-Denver, believes he has the votes to pass the bill as well as Gov. Bill Ritter's support.
The bill's backers say that the payday-loan industry preys on low-income and minority borrowers and that the loans trap them in a debt cycle. But opponents of the bill say the measure would cost hundreds of employees their jobs and force thousands of consumers to use Internet-based lenders that are unregulated.
The cap on the interest rate would allow companies to charge clients a maximum of $1.73 per $100 borrowed for a two-week period. That's far lower than what lenders make charging the current rate of approximately 329 percent APR. Lenders say that they would not be able to cover their expenses, and that the industry would die as a result.
That's already happened in states such as Oregon that have recently passed similar legislation, said Ron Rockvam, president of the Colorado Financial Service Centers Association. In Colorado, that would cost 1,800 people their jobs, he said.
"It would absolutely devastate my family," Misty Medders said. Medders manages the Fast Bucks branch at 1383 N. Academy Blvd.
The bill would hurt more consumers than it would help, Medders said. Consumers who need money to avoid bouncing checks or being charged late fees would have to turn to pawn shops or lenders on the Internet, she said.
Medders and Rockvam said they have seen clients struggle to make payments, but they deny it's a common problem. Those clients are also able to take advantage of a payment plan that allows them to pay off loans in installments while freezing interest charges and fees.
The Legislature mandated that companies offer those plans last year. It should wait to see how that law works and give the industry time to adjust, Rockvam said.
The plans still don't do enough to protect people living paycheck to paycheck, Ferrandino said. "It still puts them in a worse financial situation than they were in before they took the loan," he said.
The protesters were speaking out against HB1310, which would cap the annual interest rate lenders could collect at 45 percent. It would also limit the fees a customer would pay on a loan to $60 and prohibit a borrower from having more than one outstanding loan at a time.
The bill has passed through the House and is scheduled for debate in the Senate today. The bill's sponsor, Rep. Mark Ferrandino, D-Denver, believes he has the votes to pass the bill as well as Gov. Bill Ritter's support.
The bill's backers say that the payday-loan industry preys on low-income and minority borrowers and that the loans trap them in a debt cycle. But opponents of the bill say the measure would cost hundreds of employees their jobs and force thousands of consumers to use Internet-based lenders that are unregulated.
The cap on the interest rate would allow companies to charge clients a maximum of $1.73 per $100 borrowed for a two-week period. That's far lower than what lenders make charging the current rate of approximately 329 percent APR. Lenders say that they would not be able to cover their expenses, and that the industry would die as a result.
That's already happened in states such as Oregon that have recently passed similar legislation, said Ron Rockvam, president of the Colorado Financial Service Centers Association. In Colorado, that would cost 1,800 people their jobs, he said.
"It would absolutely devastate my family," Misty Medders said. Medders manages the Fast Bucks branch at 1383 N. Academy Blvd.
The bill would hurt more consumers than it would help, Medders said. Consumers who need money to avoid bouncing checks or being charged late fees would have to turn to pawn shops or lenders on the Internet, she said.
Medders and Rockvam said they have seen clients struggle to make payments, but they deny it's a common problem. Those clients are also able to take advantage of a payment plan that allows them to pay off loans in installments while freezing interest charges and fees.
The Legislature mandated that companies offer those plans last year. It should wait to see how that law works and give the industry time to adjust, Rockvam said.
The plans still don't do enough to protect people living paycheck to paycheck, Ferrandino said. "It still puts them in a worse financial situation than they were in before they took the loan," he said.