Payday loans in Colorado and the threat of HB 1351

The Colorado legislature building, where payday loans HB 1351 placed unreasonable restriction upon payday lending in the state.

The Colorado state legislature voted against jobs in Colorado when they passed HB 1351. (Photo: Flickr)

Various state legislatures have passed tough payday loans regulation in recent months, and now Colorado HB 1351 has made it through after a narrow vote. According to Progressive States Network, HB 1351 caps APR at 45 percent and requires that lenders give borrowers as long as six months to pay back the money borrowed.  Because payday loans are commonly a two-week short term loan, the interest a lender would gain from extending a loan at an annual interest of 45 percent would amount to not much more than the $4.14 a lender charging a 36 percent APR would receive. Thirty-six percent is a common cap that many states have placed on payday lending, and it isn’t feasible for payday lenders. The only way Colorado lenders could even begin to cover their own costs would be the leeway to charge a $75 origination fee and monthly fees of up to $30 in excess of interest, according to Progressive States.

Who cried no on HB 1351

Colorado Financial Service Centers Association and the Community Financial Service Association (CFSA) said HB 1351 is bad for jobs and the economy. In a TV spot, the organizations cited examples of how recent tax hikes and regulations in Colorado have cost the state jobs (such as 5,000 jobs that were lost). They claimed that HB 1351 would cost the state 1,600 jobs out of the payday loans industry alone. Not only that, but the legislation that the Boulder Daily Camera called “a terrible bill” in February is supported by some groups that would appear to be “targets” of the payday loans industry, if the rhetoric of the Center for Responsible Lending is to be believed. The groups include C3 – Colorado Competitive Council, the Hispanic Contractors of Colorado, Society of Hispanic Human Resource Professionals and Urban League of Metro Denver, among others.

Wall Street madness caused the financial meltdown

Yet pseudo-watchdog organizations with deep pockets claim that payday loans are to blame, particularly because of a consumer’s ability to roll over loans. What the vast majority of such criticism glosses over is the fact that not only do the most visible payday loans companies nationwide either prohibit or severely limit rollovers, the CFSA makes a point of working with the vast majority of lenders who do put consumer protections of this sort in place. Consumers don’t need Colorado HB-1351, Oregon’s SB 993, Illinois’ HB 537, Ohio’s HB209, New Hampshire’s SB 193 or Iowa’s HF 2127, to name a few. Consumers prefer having the choice, rather than having sole options dictated to them in a nanny state atmosphere.

(Photo Credit: / CC BY-ND 2.0)

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