Payday loan bill heads to committee; Plan would let state voters cap rates lenders allowed to charge

By Garrett Andrews
The Durango Herald

A bill that would let voters cap the interest rates payday lenders are allowed to charge customers heads Monday to the state's House Judiciary Committee.

House Bill 1351 would put on the ballot whether to impose a 36-percent interest-rate limit on an industry that regularly features triple-digit rates. Supporters of the bill say it would close a loophole that allows payday lenders to operate above Colorado's usury laws, but opponents say it would force hundreds of loan store employees out of work and eliminate a credit option for citizens with nowhere else to turn.

If the bill passes the committee, it would head to a full House vote, and then to the Senate. If it passes, voters could see the question on the November ballot.

There are 573 licensed payday lending storefronts in Colorado.

Corrine Fowler, co-chairwoman of Coloradans for Payday Lending Reform, a coalition of 57 organizations including Habitat for Humanity of Colorado and AARP, said they outnumber Starbucks and McDonald's combined in the state.

Durango has only two payday lending stores, and Fowler said there's a good reason.

"Durango is a fairly prosperous, middle-income, mostly white community," she said. "These places aren't spread out across Colorado, they're concentrated in urban, low-income areas with high minority populations. It's very targeted."

Fowler cites 27 payday lending outlets in one municipal district in metro Denver and 66 in Colorado Springs. Wade Buchanan of the Bell Policy Center, a Denver-based progressive think tank, estimates out-of-state payday lending companies remove about $84 million from the Colorado economy each year.

Critics of the practice say the state economy is hurt when payday debts roll over, which happens more than half the time.

More than 60 percent of payday loans were not repaid in time in 2009, according to an industry study by the Colorado Office of the Attorney General. The average customer was 37 years old and likely to be single and female.

The average loan size in 2009 was $366, a figure that has grown each year. The average finance charge for each loan was $60.68, and it took an average of 17 days to pay off the charges.

Opponents of payday lending say the industry is all but exempt from financial regulations.

"We can't predict what will happen, but we don't think this will 'kill' the industry," Fowler said. "We won't say it won't kill individual payday lending stores, but it is time to kill this product. We understand that low-income people need access to lines of credit, but this is creating more debt."

Attempts to pass similar legislation have failed each year since 2007. Fowler and Buchanan hope this year voters can break the deadlock.

Rep. Ellen Roberts, R-Durango, said she wishes the bill was as well-rounded as the payday lending reform bill she supported in 2008. She called this bill "simplistic" and said she wasn't sure setting interest rates was an appropriate task for voters.

"I'm not sure this is going to take us the right place," Roberts said. "There is a legitimate role for payday lending, particularly within this economy."

She said she doesn't know whether she'll support the bill.

Amber Long, manager of Allied Cash Advance at 22 Town Plaza in Durango, said the bill ultimately would hurt her customers more than the company.

Allied charges $20 interest for every $100 borrowed. Loans range from $300 to $15,000, according to Allied's Web site.

The company – which has the third-most outlets among payday lenders in Colorado – employs two people at its Town Plaza location.

"A lot of our customers are about to get their gas shut off or their car repossessed," Long said. "With the economy the way it is, they wouldn't have anywhere else to go."

gandrews@durangoherald.com