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Payday loans rise 1% in 2007

Worry continues over consumer debt dependency

By Jeff Smith, Rocky Mountain News (Contact)

Published November 4, 2008 at 12:05 a.m.

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Payday lending increased by only 1 percent in Colorado last year, but state officials say they still are worried by continued high interest rates, an increase in borrower bankruptcies and consumer debt dependency.

Payday loans - short-term loans at high interest rates - totaled $639 million, up slightly from $632 million in 2006. The number of licensed payday lenders decreased 7 percent to 618.

A July 2007 law requiring lenders to offer a no-interest payment plan to consumers with four or more consecutive payday loans may have curtailed the growth some, state officials said.

Though the new figures may show progress in making payday lending more consumer-friendly, "the spike in bankruptcy filings and continued high debt levels for a number of consumers suggest that there still is much work to do to help wean Coloradans off debt," Colorado Attorney General John Suthers said in a statement. His office regulates the industry and issued the annual report.

Payday loan volume remains high by historical standards. The category didn't exceed $500 million until 2005 and totaled only $36 million in 1996.

Suthers said he is concerned some lenders are restricting consumers' access to payment plans.

For example, the report showed that 17 percent of payday lenders have instituted "cooling off periods" so a fourth loan isn't considered consecutive under law, and 38 percent of lenders require cash for the payment plans.

The report showed only 50 percent of the 80,000 consumers eligible chose a payment plan, and payment plans were applied to only 21 percent of more than 200,000 eligible loans.

The average payday loan amount increased by $11 to $362 in 2007 with an annual interest rate of 318 percent. A third of all borrowers had seven or more payday loans from the same lender, and 11 percent were in debt for at least six months of the year.

"The data still show the loans are very expensive, they're still trapping people in a cycle of debt, and that a number of lenders are taking action to make it difficult for borrowers to qualify (for payment plans)," said Rich Jones, director of policy and research for The Bell Policy Center.

The nonprofit center wants payday lender fees to be cut, but legislation failed earlier this year that would have restricted the amount of money payday lenders could charge.

Heather Green, director of counseling at the Consumer Credit Counseling Service of Northern Colorado, said she is seeing a "fair portion of folks" who need help managing their debt because of payday loans, with some having as many as 15 loans from different lenders.

Comments

  • November 9, 2008

    11:52 a.m.

    Suggest removal

    upchuck writes:

    80,000 people took out these loans in 2007, and there were 15,500 bankruptcy filings here. Even if every one in bankruptcy had taken out a payday loan, the vast majority of people that use these loans use them responsibly. I sincerely doubt that taking action against payday loans will have any effect on the number of bankruptcies.

  • December 15, 2008

    10:05 p.m.

    Suggest removal

    andreaP writes:

    The idea of getting a payday loan might seem foolish for some people, they think that might be trapped in debts. But on the contrary, it can be a great experience that you will thoroughly enjoy. Some people get desperate to get extra funds for Christmas shopping, and some use payday loans for this purpose, and responsibly, but some people just take some things way too far. On Thursday, December 4th, four thieves entered Harry Winston Jewelers' Paris store, armed, and robbed the store. Three of the four wore women's clothing, busted in close to closing time, and then went about ransacking the store in record time. The robbery was over quickly, but the shocking thing was the sheer amount that was made off with. The thieves, in a matter of minutes, made off with €85 million, or about $108 million of jewelry and watches. This makes for one of the largest diamond heists in history, and it only adds insult to injury as that very same store was robbed almost exactly one year ago. French authorities are beginning the investigation, but they say it isn't likely that the thieves will be able to sell the gems taken through traditional outlets because of the high profile of the heist. Also, the research had been done, necessary to commit the deed, because the robbers knew the employees' names. During hard economic times there is a marked increase in crimes like robberies, with some people desperate to hoard a little extra cash, but this is ridiculous. Jolly Old St. Nick ought to bring these punks a shovel full from the reindeer stalls for their stockings. If you have a hard time because of sudden expenditures, you can always get a payday loan – you don't have to rob anybody and you won't go to jail for getting one. Click to read more on http://personalmoneystore.com/moneybl...