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February 20, 2010 03:49 AM UTC

Payday Lending Reform: It's On

  • 24 Comments
  • by: Colorado Pols

Announcement emails circulated this afternoon from local advocacy groups: Rep. Mark Ferrandino and Sen. Chris Romer will indeed introduce legislation to regulate the excessive interest rates charged by the “payday loan” industry, reportedly capping them at 36% instead of the present 500% or more they are allowed as the result of a decade-old loophole in the state’s usury laws. Here’s the word on the kickoff rally from the Colorado Progressive Coalition:

It is time to close the payday lending loophole.

West Steps of the Capitol

Sunday, February 21 @ 1:00 p.m.

Representative Mark Ferrandino and Senator Chris Romer to introduce a bill to reform payday lending in Colorado

The payday loan trap:

Every time you get paid, the lenders take it away. Debit after debit.

Fee after fee. Until you have no money left and no way to pay your bills.

You do the only thing you can do. Get more loans.

Pay hundreds of dollars more without ever getting ahead.

It’s financial quicksand.

We are going to end the debt trap in 2010!

Come out and help us kick this campaign into high gear!

Folks, this is the most important consumer protection legislation that will be introduced in the Colorado General Assembly this year. The payday lending industry is out of control in the state of Colorado, with more loan shops now than McDonald’s and Starbuck’s Coffee combined. Existing regulations requiring payday lenders to offer repayment plans to addicted borrowers, and limit the number of consecutive loans a customer can receive have been rendered mere formalities. The only people really safe from exploitation by this industry are members of the U.S. military that Congress chose to protect after the situation became untenable around military bases. Why not everybody else? Why not Colorado’s most economically vulnerable citizens, too?

This is a chance for Colorado’s legislative majority to make an immediate and positive impact, and reduce the harm of one of the most predatory, economically exploitative ‘business’ models in our state. A phalanx of lobbyists hired by the payday lending industry awaits this bill’s introduction, too–it’s going to be the biggest battle of this legislative session in terms of hardnosed special interest pressure, and we intend to cover every uncomfortable moment of it.  We intend to name names. As most of you know, this isn’t the first time that payday lending reform has been introduced, but the need for reform in these tough economic times has never been greater. You do not want to be the legislator who comes out of nowhere to kill this bill as has happened before: if we have anything to say about it, there will be consequences this time.

And they shouldn’t have spammed us, we want that in the Community Financial Services Association’s post-defeat analysis.

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24 thoughts on “Payday Lending Reform: It’s On”

  4. I look forward to helping rid Aurora and our state of these pariah’s of society.  36% is still too high.  They should be held to 25%. And, not allowed to be within 1,000 feet of any financial office; such as banks or credit unions. Or any business that pays its employees with a check or business that accepts an instrument of credit.

  8. My question here pertains to this: these users are the types of people that likely use the payday function.

    My guess is the target market is a bunch of white trash welfare mothers and meth dealing illegal fathers.  

    Now don’t get me wrong, earning profits from this market segment and servicing there needs is commendable.

    My second guess is if you Democrats shutter these businesses, then maybe – just maybe another tool of support for residents of Sanctuary City will force them depart for the warmer confines of Santa Fe or Phoenix or develop a local black market street source for their wayward financing.

    Last, the left over grandmothers who use these places will be forced to bank at UMB, Chase, etc… and be responsible for their financial decisions.

    2. pay day loans is deplorable.

      also

      Vile

      Disgusting

      selfish

      bigoted

      ignorant

      I bet the thought of others out in the cold, sleeping in alleys and going hungry. helps to keep Libertarded to feeling snug, cozy and sleeping well.

       

    1. Kinda ironic isn’t it David? So much for Google AdSense.

      The payday loan sharks need to be reigned in and regulated. Hats off to Pols for making this a prominant topic and for Rep. Ferrandino and Sen. Romer for taking them on.

      Have we learned nothing from the sub-prime mortgage scandal and resultant meltdown of the real estate market and ultimately the entire economy?

      I have. Public policy dictates the regulation of this “business” just as there should have been oversight and regulation of what was going on in the sub prime mortgage scam.  

  10. I support Rep. Ferrandino’s efforts to solve a painful problem for those forced to take out a loan to get them through to payday. The respected Bell Policy Center states that the payday lending industry charges on average 319% annualized interest. Because banks won’t lend struggling people money–many are forced to pay these outrageous rates to put food on the table and pay their bills.

    Our goal in government should be to protect regular citizens, and to use government to level unequal playing fields. Isn’t this an industry whose obnoxious and greedy practices cry out for responsible regulation?

    I do not to support predatory lending practices– and I, unlike my opponent, will never take political contributions from the payday lenders.

    Sincerely,

    Dave Ruchman

    Democrat for Senate District 20 [Wheat Ridge, Edgewater, Lakewood, Arvada, Golden]

    http://www.DaveRuchman.org

    “Solving Problems”

  11. From Jessica Fender’s Denver Post story on the bill’s announcement:

    Opponents predict a complete shuttering of the payday lending industry in Colorado should the proposal succeed.

    … Several dozen payday loan employees appeared Sunday at the bill announcement carrying placards asking lawmakers to save their jobs. An estimated 600 payday lending stores operate in Colorado.

    Ron Rockvam, president of the Colorado Financial Service Centers Association, said he expects those doors to close and 1,600 employees to find themselves jobless should the proposal pass.

    “This is not reform, this is an outright ban on the industry,” Rockvam said.

    His industry provides a vital service, said Rockvam, pointing to options like loan repayment plans that help mitigate the debt burden.

    Several other states that have imposed interest rate caps have seen marked drops in the number of loan stores within their borders, though proponents of the legislation say credit unions and other institutions have filled those low-income lending vacuums.

    Correct me if I’m wrong, but isn’t that like a trade association of crack dealers showing up to complain that clamping down on crack houses will put a lot of folks out of work?

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