May 26, 2010 10:01 PM UTC

The Wages of Spam

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• by: Colorado Pols

As the Durango Herald’s Joe Hanel reports, payday lending reform is now the law in Colorado:

Short-term, high-interest payday loans will begin to disappear from Colorado in August, thanks to a bill Gov. Bill Ritter signed into law Tuesday.

House Bill 1351 replaces payday loans with a new type of loan with a six- to 12-month term and lower interest rates.

“We have finally come to some real reform on payday lending,” said the sponsor, Rep. Mark Ferrandino, D-Denver. “We wanted to help end the cycle of debt.”

Ferrandino has been trying to reform the payday lending industry since he arrived in the Legislature three years ago…

Ritter said the new law sends “a powerful message that we will not tolerate exorbitant abuses of so-called payday loans.”

Half the payday lending companies in Colorado might close because of the bill, said Ron Rockvam, president of the Colorado Financial Service Centers Association.

Hanel goes on to explain that the bill will still allow payday lenders to make some of the profit they say is necessary for them to continue doing business with high-risk borrowers, but instead of a two-week cycle of perpetual interest payments, they’ll now have six months to pay the loan back at a maximum of 45% interest plus some origination fees. It’s not quite the protection that Congress has given to members of the military from predatory payday lenders, but it’s vastly better than the status quo. And we have no pity whatsoever for payday lenders closing up shop over this law: there were too many of them anyway, more than Starbuck’s and McDonald’s combined. If the 50% of payday lenders the industry estimates can’t make money on an effective APR that could still top 100% go out of business, they deserve to.

And yes, payday lending blog spammers, as we promised: your payback has arrived.