Proposition 111 Passes: Curtailing Colorado Payday Loans

Inside Subprime: Nov 8, 2018

By Grace Austin

Colorado payday loans have been delivered a major blow, thanks to a majority of support from voters this Election Day.

Colorado residents voted to pass Proposition 111 in Tuesday’s election, which would cap annual interest rates on payday loans at 36 percent and ban any additional charges and fees. It would overall reduce the cost to receive a payday loan from $293 to $53, and get rid of the current fee structure in place in the state. That law will go into effect February 1. The Colorado Secretary of State’s office said 77 percent of voters cast ballots in favor of the measure.

Prop 111 was first filed in February, and more than 188,000 people signed the initiative before it was submitted for the ballot in August. Those supporting the initiative said they wanted to use a direct ballot measure to pass greater payday reform into law, as opposed to going through the legislature where it could be stalled due to outside interests.

Prior to passage of the initiative, payday loan firms in Colorado could charge upward of 200 percent, including fees and interest. Colorado’s average APR was 129 percent in 2016. Almost a quarter of payday loans ended in default, too.

The Colorado Public Interest Research Group said that payday loan firms take $50 million from residents of the state annually. And Center for Responsible Lending data showed that Latinos and African-Americans were disproportionately hurt by payday loan firms in Colorado — payday loan stores are more likely to be in predominantly Latino and African-American neighborhoods than predominantly white neighborhoods in the state.

The targeting of disenfranchised groups (low-income people, the elderly and veterans are also more likely to use payday loans) led to much of the campaigning for Prop 111, from such disparate groups as faith leaders and consumer advocates. A committee, Coloradans to Stop Predatory Payday Loans, spent more than $2 million in support of the proposition, according to a local TV station.

Prop 111 follows Colorado’s 2010 payday loan reform, which gave borrowers six months to pay and limited loan renewal to just one time. The compromise legislation seemed to work — the number of payday loans dropped by about 25 percent, according to the Colorado Attorney General’s Office. But payday loan firms were still allowed to operate in the state and prey on consumers.

And while Colorado still hasn’t outrightly banned payday loans with the passage of Prop 111, that may be the next step for advocates — Colorado would then join more than a dozen states and the District of Columbia in prohibiting payday loans altogether.

For more information on scams, payday loans and title loans, check out all of our state-by-state Financial Resource Guides.

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