Payday loan bill started off like a racehorse at state Capitol, now is a plug
By Marianne Goodland
The Colorado Statesman
The effort to race through a change to last year's legislation on payday loans has slowed from a flood to a trickle.
House Bill 11-1290 was introduced on Friday, March 25 and had its only committee hearing just four days later. Six days after its introduction, HB 1290 was voted out of the House on a 36-27 vote, with four Democrats voting with the chamber's 32 Republicans present that day.
And then it headed to the Senate, and three weeks later the bill, sponsored by Sen. Rollie Heath, D-Boulder, isn't on the schedule for a hearing in the Senate Finance Committee to which it has been assigned.
Part of that can be attributed to the Senate work on the 2011-12 budget, which wrapped up on April 11. Since then the delay can be attributed in part to the fact that its Senate sponsor is also co-chair of the Joint Select Committee on Redistricting, which this week is back in negotiations over congressional district maps.
But there's a third factor at play: mounting opposition from nonprofit groups that supported the 2010 legislation and negotiations with Democrats that don't always include the bill's sponsor.
And the vote of one of the committee's new Democratic members is likely to decide the bill's fate.
HB 1290 would make the origination fee on a payday loan "fully earned" at the time the loan is taken out. Under the law passed in 2010, payday loans can result in three types of interest charges. First is the origination fee, which is $20 per $100 for the first $300, and $7.50 per $100 for the next $200, for a maximum loan of $500 and maximum origination fee of $75. Lenders can also charge a monthly maintenance fee once the first 30 days have passed, of $7.50 per month per $100. The third fee is a finance charge of 45 percent. Borrowers can repay the loan anytime between two weeks and six months.
Under HB 10-1351, if the loan is paid off early, the origination fee is pro-rated and the borrower would pay only a portion of it; under HB 11-1290 the origination fee is fully earned and the borrower would have to pay all of it, whether the loan is paid back in two weeks or six months.
Senate Finance Committee Chair Michael Johnston, D-Denver, said the bill has not yet gotten a place on his committee's calendar because "I want to give people time to hear both sides."
One of the primary backers of last year's payday reform bill is Corrine Fowler of the Colorado Progressive Coalition and Coloradans for Payday Lending Reform. She said Tuesday that the coalition never would have agreed that the origination fee was fully earned at the time of the loan. "Sen. Heath never intentionally or directly worked with the coalition at any time in the last four years," she said. "We understand if Sen. Heath has a different memory but we would never have agreed to the origination fee" as is proposed in HB 1290, she said.
Fowler said that making the origination fee fully earned will drive up the annual percentage rate on a 30-day $300 payday loan from 86 percent to 289 percent. For example, a borrower who takes out a $300 loan and pays it back in 30 days currently would pay $21.75 in fees; under HB 1290 the borrower would pay $71.25.
Rich Jones of the Bell Policy Center sees the delay caused in part by Heath's redistricting work as advantageous. The Senate leadership "has been more willing to listen to us than the House did," Jones told The Colorado Statesman this week. "Heath has his view on this; our argument is to kill it."
Jones said last year's negotiations, which he likened to quick sausage-making in the waning days of the session, spent very little time on how HB 1351 would work once passed. There were no discussions on the Senate floor, where Heath introduced the amendment on the origination fee, on whether it would be refundable or not. Jones said the issue of how the origination fee would work was never brought up in discussions that involved the coalition, although Jones said Heath probably discussed it with the payday lenders. Jones noted that the rules governing the reforms didn't go into effect until last November. "Give the reforms time to work," he said.
One of the co-sponsors of HB 1290 is Sen. Greg Brophy, R-Wray, a finance committee member. Republicans are likely to support the measure, given that the 2010 legislation was opposed by every Senate Republican.
As far as the Democrats are concerned, the critical vote may come from first-year Sen. Cheri Jahn, D-Wheat Ridge. Jahn has a history of favoring payday lenders; in 2008, as a member of the House, she voted against HB 08-1310, which would have reduced the interest rate on payday loans to 36 percent. In 2007, Jahn voted in favor of HB 07-1261, which put into effect payment plans for borrowers who take out consecutive payday loans, and was signed by Gov. Bill Ritter. The following year, Jahn voted for HB 08-1126, which also dealt with payment plans but died in the Senate. Both bills were supported by the payday lending industry as stopgaps against larger reform efforts.
Last year, Jahn faced a tough primary challenge in her race for the Senate, beating fellow Dem David Ruchman by 554 votes out of more than 10,000 cast. Jahn's votes in favor of the payday lending industry were used against her in campaign materials developed by a Democratic 527, Colorado Alliance for Working Families.
Payday lenders and their lobbyists have contributed to Jahn's campaigns over the years, including at least three contributions to her 2010 Senate campaign. But Jahn, who appears to have an open mind on the latest effort, told The Statesman that the money isn't a factor; what matters to her is the policy. "It isn't that I've been a supporter of the payday lending industry," she said Wednesday. Protecting consumers and protecting civil liberties is her interest, and people in her district have told her that they can't get loans from traditional banks. In those situations, payday lenders are their only option. "I have to find a balance for consumers," Jahn said. "That's my job."