Attorney Generals unite to reject payday lending proposal

Inside Subprime: July 11, 2018

By Jacob Rogers

In a rare alliance of ideas, Colorado Attorney General Cynthia Coffman, a Republican, and Massachusetts Attorney General Maura Healey, a Democrat, are spearheading an effort asking Congress to reject two proposals which would hurt individual state’s ability to limit interest rates on payday loans. This is according to The Daily Sentinel, a Grand Junction, Colorado based paper.

In a letter to Senate leaders, Healey and Coffman, along with 18 other attorneys general, said HR3299 and HR4439, known as the Protecting Consumers’ Access of Credit Act of 2017 and the Modernizing Credit Opportunities Act, respectively, would let non-bank lenders get around state usury laws  and charge excessive interest rates.

“Colorado has long exercised its sovereign right to protect consumers from abuse by limiting the interest rates that lenders can charge on consumer loans,” Coffman said. “While state interest rate limits are pre-empted by federal law for some bank loans, the pending bills seek to improperly expand that pre-emption to include payday and other non-bank lenders. I join my fellow state attorneys general in urging Congress against the further restrictions of states’ ability to protect their citizens from lending abuses.”

The letter is signed by attorneys general in conservative states like Tennessee and Mississippi, as well as solidly blue states like California and Hawaii. The letter goes on to say these bills take on issues which have been left to states to decide.

“States have, over time, crafted laws that create a careful balance between access to credit and protecting consumers,” they said. “Both Congress and the Supreme Court have rejected efforts to circumvent those laws and limit enforcement of them, including state actions against banks.”

Many states, including Cynthia Coffman’s Colorado, still have a ways to go in terms of protecting consumers. While Colorado does have a 36 percent usury rate, a report from Coffman’s office says that the average actual APR for a payday loan in Colorado is 129.5 percent. According to The Bell Policy Center, “[in] 2016, the average payday loan in Colorado was $392, but after the origination fee, 45 percent interest rate, and monthly maintenance fee, borrowers accrued $119 in charges to get that loan.”

There are three ballot proposals that address payday interest rates in Colorado. Initiative 126 would cap the interest rate at 36 percent and scrap all fees. Then there is Initiative 183 and 184, which would reduces the rate to 36 percent without touching fees and lower monthly maintenance fees from $7.50 a day down to $5 a day, respectively.

To learn more about payday loans in the United States, check out these related pages and articles from OppLoans:

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