Colorado Petitions for Payday Loan Initiative on Fall Ballot
Inside Subprime: Aug 7, 2018
By Kerry Reid
On Monday, August 6, payday loan reform advocates in Colorado turned in signatures for an initiative to be placed on the November ballot to Secretary of State Wayne Williams. Backers of Initiative 126 collected 188,045 signatures for the measure, which, if passed by Colorado voters, would cap the interest rates and fees for payday loans in the state at 36 percent.
That number comes up often in discussion of payday-loan reform, as outlined in a 2013 report by Lauren K. Sanders for the National Consumer Law Center. In 2007, a federal law passed that required payday-loan operators to charge no more than 36 percent interest on loans made to active-duty military personnel.
Last year, a federal law, the Protecting Consumers from Unreasonable Credit Rates Act, was introduced. It has been stuck in committee in the U.S. Senate and the House of Representatives.
As quoted by Marianne Goodland in an article for Colorado Politics, Corinne Fowler of the Campaign to Stop Predatory Payday Loans said of Initiative 126 “It was an easy signature to get. People understand this is a predatory product and no one should be charging 200 percent interest on a $500 loan.” She also suggested, however, that advocates collecting the signatures faced aggressive “interaction” from some opponents.
Earlier this year, the Colorado Supreme Court dismissed a case attempting to derail the petition. The case was brought by Bill Fritts, the owner of Emergency Cash in Denver. As reported by John Herrick of the Colorado Independent, the industry position argued by Fritts’ attorneys was that “the initiative does not take into account impacts on the economy — namely that some businesses may have to shut their doors — and that voters should be aware of these impacts when they go to the ballot in November. They said they are also concerned by the use of the word ‘payday loan’ in the initiative’s title, though the phrase ‘payday loan,’ is used by many lenders on their windows. Lenders argue it’s a catchphrase that will create an unfair bias in support of the initiative.”
Other groups in Colorado supporting the measure include the Colorado Public Interest Research Group (CoPIRG), CoPIRG claims “Payday lenders drain $50 million per year from struggling Coloradans. When a borrower takes out a payday loan, the payday lender gains access to their bank accounts, meaning they can collect their fees regardless of whether people have the money to pay.” CoPIRG is part of a consortium called the Financial Equity Coalition that is working for further reform on predatory lending and other fiscal issues.
Colorado passed legislation in 2010 that provided some reform for the payday loan industry. As reported by Tessa Cheek in a 2014 article for the Colorado Independent, that legislation was considered a possible model for compromise as the Consumer Financial Protection Bureau under then-director Richard Cordray looked to rein in predatory practices. The 2010 law set six-month terms for the loans and required borrowers to be able to pay the debt down in installments, rather than one lump sum. They can also pay it all off early without incurring extra penalties or fees.
According to Cheek’s report, that bill did “end up taking a big bite out of the payday loan industry in the state, halving the number of stores and reducing the total number of loans from 1.57 million a year before the law to 444,000 per year.” (The latter figure was also reported by American Banker.)
Now Colorado payday-loan reform advocates hope that the Centennial States joins the 15 states (and the District of Columbia) that have either banned payday loans altogether or instituted a 36 percent cap on interest rates for these products.