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Payday loan bill languishes due to Veiga amendment

By David Milstead, Rocky Mountain News (Contact)

Published April 21, 2008 at 8:22 p.m.

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A legislative attempt to place restrictions on the state's payday lending industry appears dead as the bill languishes in a Senate committee.

House Bill 1310 sought to restrict or eliminate most of the fees and set a maximum interest rate on payday loans. Backers of the bill said it would end payday borrowers' "cycle of debt."

The bill ran into trouble from the beginning, with opponents saying payday loans are cheaper than bounced checks or other late fees. The payday loan industry argued the restrictions would effectively put it out of business.

They achieved a key victory March 25 on the Senate floor.

The bill, as written, allowed payday lenders to charge fees on only one loan to each customer in any given year. An amendment proposed by Sen. Jennifer Veiga, D-Denver, removed that restriction and allowed lenders to charge fees on every payday loan. It also cut a 30-day minimum loan term to seven days.

The Bell Policy Center, a policy group that is one of the bill's strongest backers, calculated that the Veiga amendment returned effective interest rates to a range of 350 percent to 566 percent on a 14-day loan. It actually increased the rate on a 14-day, $100 loan, Bell President Wade Buchanan said in an interview in late March.

The amended bill still has language about a 45 percent cap on the loans, but Buchanan said in March, "it achieves nothing unless it's combined with a much more restrictive size of fees or length of loans."

Veiga's amendment also called for a financial education program. The possibility of extra state spending earned the bill a trip to the Senate Appropriations Committee, where it's sat for nearly a month.

But it seems the sponsors of the bill are so unhappy with the current amended version that they don't want it to pass unless it can be changed back. Senate Majority Leader Peter Groff, D-Denver, ripped the Veiga amendment last month on the Senate floor, saying it "gouges folks."

"Consumers need a voice down here - consumers lose when we negotiate," Groff said.

Milstead@RockyMountainNews.com or 303-954-2648

Comments

  • April 22, 2008

    12:11 p.m.

    Suggest removal

    PaydayLendingRepresentative writes:

    Consumers do need a voice. Payday loans can be important options for individuals who are facing a temporary shortfall between paydays due to an unexpected expense. There are limited options available for consuemrs who need short-term credit. Taking away payday loans means one less option. Don't leave consumers forced to choose between more expensive options like bounced checks and late payments.