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Payday loan bill advances

By David Milstead, Rocky Mountain News (Contact)

Published March 6, 2008 at 12:05 a.m.

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A bill to cap fees charged by payday lenders moved to the full Senate on Wednesday despite pleas from the industry that it would be killed off by the measure.

The Senate Judiciary voted 4-3, on a party line vote, in favor of House Bill 1310. The bill limits the annual interest rates on deferred deposit, or "payday" loans, to 45 percent. Currently, the fees charged on a payday loan translate to an annual percentage rate of more than 390 percent.

A coalition of political, social and religious groups has targeted the industry, saying it profits from customers trapped in a cycle of debt. Figures from the Colorado attorney general's office, which regulates payday lenders, estimates the "average" customer paid $573.06 in total finance charges to borrow $353.88 for about 51/2 months.

"A payday loan is not set up for success - it's set up so that you get into that cycle," said Dale Mingilton, a board member of Mile High United Way and a former banker.

Payday lenders, as well as their employees and customers, came out in force to testify against the bill. Employees expressed concern about their jobs, while customers testified that the loans got them through tough times.

Some lenders owned just one or two stores, like Richard Patnoe, who owns Cash Outlet in Longmont and Dacono. He makes very little on his utility-bill payment, money-order and Western Union services, he said, so if payday loan fees are cut, most of his profits will be, too.

"There seems to be the impression that some stores will stick around. Mine will not."

The hearing also attracted the CEOs of regional and national companies.

MoneyTree's Dennis Bassford said if the bill is approved, "I will be forced to close all 13 of my Colorado locations."

Senate President Peter Groff, D-Denver, the bill's sponsor, said the purpose wasn't to shut down the industry, though he was not concerned about lenders who would close.

"Innovative businesses" and credit unions "would step into the void," he said.

Comments

  • March 6, 2008

    7:18 a.m.

    Suggest removal

    rwmorrisonjr writes:

    If people would learn to live within their means, then these financial rapists wouldn't have a market to begin with. These are the same people who set up shop in poor neighborhoods and right outside military bases, and led the U.S. government to pass laws to keep them away from the bases: they create a vicious cycle of indebtedness that leads to larger problems. I'm no fan of this type of predatory lending and hope that those who do run these businesses go down in flames. Good riddance.

  • March 6, 2008

    12:49 p.m.

    Suggest removal

    callanerd writes:

    Nice comment, where do you work? I suppose it is the same as a hot dog stand who sells a hot dog for $3.95 when it costs roughly 35 cents. What kind of APR is that. The bank charges you $35 for bouncing a check whats the apr on a $100 check then. Shortsightedness and name calling is not always the answer. There is a market for the product when it is used CORRECTLY. Most payday customers are middle class folks. Coming from the finance industry, poor people don't pay, because they cannot. A large majority of these folks have destroyed their credit, now thats our fault too? The industry looks for a middle class customer who needs a couple of bucks for a couple of weeks.
    People have choices, and you can choose not to do this. Don't even get me started on Credit cards and the rates they charge. There are good lenders out their who follow the law and for you to say that about all of them is wrong. Come on over to my store that has been in business over 10 years and talk to the customers before you make a blanket statement about an industry you do not understand.

  • March 6, 2008

    2:22 p.m.

    Suggest removal

    Vito writes:

    True story, callanerd.

    I'm sad to see this bill pass out of the Senate judiciary committee. Senator Groff has great passion for this issue, but I believe him to be misinformed. Last year's bill is working as many, many people have used the payment plan.

    People opposed to payday lending are using the same old generic talking points that don't even apply to Colorado. Cycle of debt... predatory lending... outrageous APR... targeting poor people and minorities... etc. They're ignoring the data.

    The Virginia Pilot did a study showing that payday lenders actually exist more in middle class neighborhoods than anywhere else. You can read it here: http://www.reuters.com/article/idUS22...

    If this bill passes, a viable, short-term credit option will be removed for everyone. Payday lending fills a niche that traditional banks and other entities can't fill. We'll all be a lot worse off if they're gone.

  • March 8, 2008

    8:55 a.m.

    Suggest removal

    dnvreader writes:

    How thoughtfull are these payday lenders about their customers when they are about to be baned. "How poor people will be able to pay for their bills on time.."
    TOO BAD NO ONE CARED WHEN I WAS IN ONE OF THEIR STORES TO BORROW MONEY WITH MY CHILD last year. They were happy to have piece of my paycheck though I had to buy food for the whole family.
    GET RID OF THEM NOW . There customers are the biggest supporters of that bill. It's a right thing to do.
    Get people educated in financial management.

  • March 11, 2008

    8:07 a.m.

    Suggest removal

    aclark writes:

    Dnvreader - Your comment suggests that you chose a payday loan for short term credit. You had other options (bounced check fee, overdraft, late fee, borrowing from friends or family, advance from your employer, etc.) just as people do now, yet your choice was a payday loan. If you chose a payday loan today from a CFSA member, you could opt into a free payment plan to pay the loan over four pay periods. If you took out four consecutive loans, Colorado law provides you with a free payment plan to pay the loan over six pay periods. Other creditors don't typically offer these flexible terms. Consumers have great protections and options per the Colorado law. Now that you no longer need short term credit, please don't take away this choice from others.

  • March 14, 2008

    5:50 p.m.

    Suggest removal

    getthefacts writes:

    For those of you who think payday lenders pray on innocent people. Do they twist your arm or threaten you until you take out a loan, a loan in which has set fees poasted on the wall a loan in which has a contract that you sign on your free will that also has the fee in which the loan cost that you have to agree to and sign before you are givin the money. All people that use these services do it on there free will! who are you to take that away?