Payday lenders to be targeted again? Think tank urges lawmakers to do it
Denver Daily News
A progressive Colorado think tank is pushing lawmakers to once again go after payday lenders.
Previous legislative attempts to cap interest rates and fees failed, but The Bell Policy Center is more hopeful this year.
The sponsors themselves killed legislation introduced in 2008 by Rep. Mark Ferrandino, D-Denver, and former Sen. Peter Groff, D-Denver, after former Sen. Jennifer Veiga -- also a Democrat -- introduced amendments that essentially gutted House Bill 1310, smiling favorably upon the lending industry.
The bill would have limited lenders to 45 percent interest and a one-time fee, and allowed borrowers at least a month to repay their loans.
With Veiga retired from business at the statehouse, the Bell Policy Center is more hopeful that similar legislation will pass this year.
‘Vicious cycle' of debt?
The think tank believes payday lending boxes people into a "vicious cycle" of debt, with interest rates that sometimes sore to as high as 521 percent.
"Payday loans trap thousands of Coloradans in a cycle of debt that is difficult to escape," states the Bell Policy Center in a news release. "We need action now to protect our most vulnerable residents from this predatory product."
Ferrandino -- the last man standing among primary sponsors to similar legislation -- told the Denver Daily News yesterday that he has not made any decisions yet as to whether to carry a similar attack on the industry.
"It's still an industry that preys upon people across our state," he said. "When we have more payday lenders than McDonald's and Starbucks combined, that's a sign that there are some problems with predatory lending."
Critics of attempts to crack down on the industry believe it would force lenders out of business; people in need of emergency loans would be completely out of luck, they say.
Citizen protest in 2008
Citizens themselves took to the steps of the Capitol in 2008 to protest Ferrandino's legislation. Many were borrowers who argued that the bill would have left them with no options to secure emergency loans for things like medicine and groceries.
But the Bell Policy Center says with average interest rates of 318 percent, citizens are doing themselves a disservice to take out the loans, and government should intervene.
The think tank points out that 33 percent of payday borrowers took out seven or more loans from a single location and approximately 11 percent had 13 or more loans.
"The problem with payday loans is that they are very difficult to repay," states the Bell Policy Center. "If you bring home only $700 or so per pay period and need a quick $500, what are the odds that two weeks later you'll have that $500 plus $75 more in fees? Not very high."