January 15, 2010 01:05 AM UTC

Payday Loans Bad for the State. Therefore, They Aren't Good for Residents

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• by: TheBell

(I hate spammers and payday lenders – promoted by Danny the Red (hair))

It was good to hear House Minority Leader Mike May say that payday loans are not the recipe for financial security.

Yesterday, he said that the state “cannot continue to use payday-loan-like policies” in trying to fix the state’s budget mess. We hope he shows the same concern for thousands of hard-working Coloradans who face their own financial crisis because of predatory payday loans.

After all, thousands of Colorado residents are punished by payday lending every year. Many borrowers take out one loan and plan to pay it off quickly, but then find they can’t. They end up with multiple loans and get caught in a cycle of debt.  

We’d like Rep. May to remember that payday lenders started operating in Colorado in 2000 after they were granted a special exemption — a loophole that allows them to exceed the state’s usury limit. Now they charge as much as 520 percent on loans.

If the Great Recession has taught us one thing, it is that people ought to be protected from loan products that are harmful. It hurts them, it hurts the rest of us and it hurts the economy.

As long as payday lenders can use their loophole to operate above the state’s usury limit, it’s an unfair and predatory market.