Payday lenders urge letting '07 law work
By David Milstead, Rocky Mountain News (Contact)
Published March 12, 2008 at 12:05 a.m.
Photo by Dennis Schroeder / The Rocky
State Sen. Jennifer Veiga, D-Denver, walks away from a rally on the Capitol steps after speaking against HB 1310, which would cap payday lending interest at 45 percent per year instead of the currently legal rate of roughly 390 percent.
As the payday lending industry fights a bill that would severely cap the fees it charges, it's asking legislators to let a new law, which mandates payment plans for its customers, work.
"The cycle of debt just doesn't exist," Stephen Chavez, an employee of Paycheck Loans, told a cheering crowd Tuesday at a pro-payday lending rally at the Capitol. "We offer a payment plan after your fourth loan."
The state law, effective since July, requires lenders to offer a no-fee, no-interest payment plan once the borrower takes out a fourth consecutive loan. But the Colorado attorney general's office finds that nearly half the lenders it's examined since the law took effect have new rules that can prevent borrowers from using the payment plan.
"Some lenders have implemented policies that result in consumers never having a fourth consecutive loan," Laura Udis, the administrator of the Colorado Uniform Consumer Credit Code, told the Senate Judiciary Committee last week.
Some of the lenders insert a brief waiting period between the third and fourth loans they extend, Udis said. That means the fourth loan is no longer "consecutive" under the law.
Other lenders are simply telling customers they'll be cut off from new loans if they take out a payment plan, Udis said.
In a subsequent interview, Udis told the Rocky that 19 of the 40 companies examined between September and February had policies like these that "affect eligibility" for the payment plan. Those 19 companies had 161 locations across the state, representing one-third of the payday lending stores owned by the companies examined, and 25 percent of all payday lending licensees in Colorado.
The statistics are inconvenient for payday lenders, who argue that last year's law should be given time to work.
Dennis Bassford, the CEO of Seattle-based Moneytree, said his company does not have the rules described by Udis. Moneytree goes beyond the state law and offers a payment plan that's part of the "best practices" of the Community Financial Services Association, a payday lending industry trade group, Bassford said.
Bassford, who said he'd heard of lenders adopting the rules, said, "We're supportive of ideas from our regulators to make sure that people are complying with both the letter and the spirit of the law."
Payday lenders are currently allowed to charge fees that translate into an effective annual interest rate of roughly 390 percent. House Bill 1310 would cap the rate at 45 percent, a drop so significant it would put the industry out of business, the lenders argue.
"We would eliminate an entire industry because a few people have devised ways to essentially disregard the payment plan for their customers," Bassford said. "It seems like a radical approach."
Finance Editor David Milstead can be reached at milstead@RockyMountainNews.com or 303-954-2648.
Differing Democrats
It's not a good sign when Sen. Jennifer Veiga, a Denver Democrat, shows up at a Capitol rally to tell a crowd of people who work for payday lenders that she opposes her party leader's bill to cap the cost of quick-cash loans.
Senate President Peter Groff, a fellow Denver Democrat, is sponsoring House Bill 1310. It's been on the calendar for a full hearing in the Senate, but was postponed both Monday and Tuesday. It's scheduled for today.
Veiga told the crowd she's concerned about how the bill could impact their jobs and consumer access to emergency cash.
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March 12, 2008
3:37 a.m.
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gwats writes:
You know, Jesus threw the moneychangers out of the Temple for usury. Not a bad example for what we need to do with these ba$ta#ds!
March 12, 2008
7:04 a.m.
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Jackieg218 writes:
Let me start by saying I am one of those (to quote other users) loan sharks or money changers and I myself have had to use loans. So before you say that we "prey" of people lets start by looking at some facts. With my company (and I can only speak for the company I work for)our corprate purpose is:
To be a Christ-centered company that strives to honor and glorify God in all that we do.
To be good stewards of the resources entrusted to us for the betterment of all with whom we come into contact.
To always value the quality of life in personal, spiritual and career development.
I have had to use the payday loans before for times of emergency, when used PROPERLY it is a great thing. I have had to use them to cover the gap that sometimes happen. I borrow ONLY WHAT I NEED and then pay it back next check. I dont drag it on and on and on.
to be continued
March 12, 2008
7:16 a.m.
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Jackieg218 writes:
the real problem is when people live out side their means. Cell phone, HBO, High speed internet....these things are not NEEDS, they are wants. However people feel they NEED them so they over extend themselves, get payday loans to cover the difference, then whine and cry about it when they come due.
We offer TWO payment plans, CFSA plan is 4 payments with no fee or interest, that can be taken out at anytime. Then we also offer the colorado payment plan that is after the 4th loan. We are not one of the companies that make it where you never make it to that 4th loan. And I do not agree with the companies that do that. Bit the colorado payment plan is 6 payment with no fee or interest.
The problem is when people go get 5 loans and then have no way of paying for them.
So should we be a fault for somone's bad budget? I think not. Additionally, a "loan shark" is someone who has a big guy named Guido that will come break your legs if you are a day late, we on the other hand will hold you that extra day if you cant make it in, With NO ADDITIONAL CHARGE!
The big picture needs to be looked at here, if this law if passed, we close... bottom line, then when people (like myself) run into tires that need replaced, meds need bought and trust me with HIGH HIGH co-pays mine are 50.00 a pop, or school supplies need bought for your 4 kid... where are you going to go? Again, I stress, when used PROPERLY we are a great alternative to bounced check fees, daily over draft charges etc. Then the government will look at Rent to Own places, Pawn Shops and such, they will be next to be attacked.
So look at this for what it is, a GREAT SOLUTION to the occassional emergeny. Not a way to put people in debt.
March 12, 2008
7:24 a.m.
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Jackieg218 writes:
In closing I must say that I DO belive some regulations need to be places, no system is perfect. I belive that we need to make it where the number of loans are limited per consumer, not allowing them to take out 5 loans at a time with 5 different companies, I belive we need to bust down on the companies that make it where you cant make it to that 4th loan and I also belive that people need to be educated on how to budget. I dont feel its our place (as a lender) to talk to them about their budget, but I really feel that the individual needs to take some responsibility about learning how to live with in their means.
So I belive HB1310 needs to not pass, do we really want the government in our business of when we have a set back? I for one dont want the choice taken from me. Nor do I want to try to figure out how I am going to support my family. My husband and I have 5 kids and a grandson I am paying for and we are doing it 100% by ourselves, not like we use the government to assist us in any way. Dont take away my means of supporting my family.
March 12, 2008
12:42 p.m.
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xeeian writes:
"If thou lend money to any of My people, even to the poor with thee, thou shalt not be to him as a creditor; neither shall ye lay upon him interest." (Exodus, 22:24)
March 12, 2008
4:16 p.m.
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The_Punnisher writes:
Shylock WILL have that pound of flesh closest to the heart..
http://en.wikipedia.org/wiki/Shylock
http://en.wikipedia.org/wiki/Usury
http://en.wikipedia.org/wiki/Extortion
March 12, 2008
5:31 p.m.
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putput writes:
I have been working at a Payday lender now for 9 yrs, I am not a "Stalker" or PREY on the poor. or a "bast##*' as the last person said. I work with my customers, I offer them the payment plan, I let them know the interest rates on a SHORT TERM cash loan. The customers that come in range from Teachers to County Workers, Jailers, Sherrifs, Socal Workers. They are aware of the terms, and if they use it as a SHORT TERM CASH loan, it is a HUGE help in the financial needs that we supplie...i have been asked "If you close where can I go in case I have a finacial Emergancy NOW ? "
March 12, 2008
5:32 p.m.
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Jackieg218 writes:
Well first off let me start by saying this doesnt need to turn into a bible war, I wont be tossing scripture to please you, that being said, you quoted the wrong verse, its not Exodus 22:24, it was Exodus 22:25. You were off by a verse.
This isnt about the bible, this is about offering a service to folks who run into problems. I have no idea why this is such an issue. We dont charge interest, its a flat fee, why is it so hard for people to see that. At times in one life they may gladly pay a small fee to either obtain or refrain from something. I paid 40.00 to get 200.00 that was a 18 day loan, was it worth it to me? Yes big time, I cant go with out my medicine and I am on 3 that are 50.00 each for a co-pay, I ran out of meds about 5 days before I got paid, problem solved, I got a quick loan and PAID IT OFF NEXT CHECK.
When are the people going to see that this is a FEE... this is already a high rish business to begin with, there are so many people out there that think it is not needed to pay us back, we take it on FAITH that when we loan money that they will be in to pay on the due date. Where else are you going to get that.
Like I said, I feel some changes need to be made, some of the lenders DO skirt the colorado payment plan, they need to be dealt with. If you look at the big picture though, I think you will agree with what I said earlier, people need to better budget money and some changes need taken place with lenders... why cant we focus on a solution that both parties win?
March 12, 2008
5:46 p.m.
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putput writes:
Well said Jackieg218, it is a FEE PER LOAN..and the customer decides if they need to take out a new loan AFTER paying off a loan in FULL..Credit Card late fees, NSF check Fees, medications, unexpected trip for a funeral, Co pay for a ER room, Bail money, car problems...all sorts of things happen in a persons life..The FEE is not a problem, its the ones whom can't buget thier money, get in debt, and have to blame it on somebody. Payday lender are regulated, and law abiding..NOT STALKERS...
March 13, 2008
1:53 p.m.
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Grant writes:
Hey you Bible quoters, do you own a house? Did you buy it outright? Here is a quote for you, "let he who is without sin cast the first stone." Usury is charging interest, which means all banks, credit cards, and loan companies are living in sin? I don't think so. What has happened since Jesus walked the earth is that prices have sky rocketed, so have rockets! So if we are to live by your rules, we need to lower the prices of everything so that we don't have to take out loans in order to pay for them. Don't be stupid, I believe in the Bible just as much as the next guy, and if I lend my friend money, I would not charge him interest, but if I borrow money from a business, I expect to pay for it, that is the way of the world today. What we need to do is stop blaming the payday lenders for the problems of the borrowers. We need to stop blaming the payday lenders for everyone else's irresponsibility! If I borrow 100 bucks from a friend, and am not able to pay it back, I don't blame my friend for lending me the money! That is just stupid. So why are we blaming our payday lender friends for providing a great service? In a recent article by ex senator and presidential candidate George McGovern, he says, "[p]ayday lending bans simply push low-income borrowers into less pleasant options, including increased rates of bankruptcy," Mr. McGovern rightly poses the question: "Why do we think we are helping adult consumers by taking away their options?"
Later in the article, he says, "[t]he nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else."
This is how we need to look at this topic. Leave the payday loan stores alone and look for other options. Instead of taking away payday lenders, beat them at their own game by giving consumers even more alternatives!
March 13, 2008
8:57 p.m.
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Jackieg218 writes:
Very well said Grant!!!!
As I have been saying we do (society) not the lenders, need to educate the people who cant live with in the means in which they earn.
I was a stay at home mom for my daughter until she started 1st grade, that was a very important thing to my husband and myself and did it mean we could live high on the hog like I did prior to birth, OH HOW I WISH!! We needed to give up a lot of "extras" to have me stay home, but to us it was 100% worth it.
Learning to live with in your means will cut down on the folks who take out 5 loans at 500.00 a pop.
I think that the payday advance lenders need to have the dark shadow put aside that everyone places on us. I have customers who stop by to show us a new puppy, or baby, or give us an update on their dating life etc.... because we develop a friendship with them, if we were "predatory" in nature do ya think they would even think twice about sharing the personal aspects of their lives?
I know that I will sadly miss most of my customers if we need to close because of this law. I see them in Walmart or City Market and we visit, sometimes we even meet for coffee. I have had the awesome chance to share my faith with my customers and even some have joined my church.
Maybe its that I live in PoDunk USA (Canon City) and due to the small town we all intermix so well, but I love my job and I love my customers and would truly miss being able to keep both.
Just my 2 cents!
March 20, 2008
11:04 a.m.
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gigithree writes:
I have mentioned this before in other posts, but this law is pure junk, and really just a political ploy for attention at the Dem convention in CO. The sponsor is looking for a name, and has enlisted some non-profits...thats all. If they were concerned about cycles of debt they might conisder alternatives as Grant pointed out, but the Pay Day Lenders are an easy political target, just look at the previous posters riled up and quoting scripture, so silly...
How about focusing on education (general and financial), bank fees, bounced check fees, credit score destruction, and subsidized alternatives. No, that would require to much work and could be poltically damaging, so they choose this approach.
Major banks won't touch these customers, no other lenders, so where does this leave them...worse of and with no where to turn.
March 23, 2008
10:40 a.m.
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iBNipper writes:
I also work for a payday lender and I have to say that payday lenders need to be regulated to a certain extent. However, this bill in its current state will lead to payday lenders across the state to close their doors. This bill will only make Colorado consumers to go to other sources (most unregulated) for emergency cash.
When used as intended, payday lenders provide a much needed service to those who find themselves in a short-term financial bind.
The Colorado legislature made a step in the right direction by passing a law that was enacted in July, 2007 enabling us to provide an extended payment plan to our customers after their fourth loan. I go one step further when I see a customer in financial hardship. I offer the payment plan when it is clear that they will not be able to pay us back in any other way. I don't wait until the third or fourth loan.
I believe that all payday lenders should be compelled to access some sort of database to determine if a customer has an outstanding loan before granting a loan. I also believe that these customers should be limited to having only one payday loan at a time. How can someone expect to payback two or more $500 loans whose net pay would barely cover one?
I have personally seen some potential customers come to my store to get a loan who have admitted they had one or more existing payday loans. I say potential because I turn these people away. These are the people who are making it possible for this bill to be in existence.
I have had customers who have contracted a credit counselor and it was disclosed to us that they were able to take out 10-15 payday loans. If payday loan companies had access to such a database, the people we serve would not be able to get over their heads.
All this being said, I think that the Colorado legislature will hurt the same constituents they say they are trying to protect. You need to tell them that they can't your ability to choose what YOU thinks is best for YOU! If you allow them take away your choice on this, what will it be next time? I shudder to think what freedom or right will fall next.