Bill to increase cost of payday loans dies in committee
Fee increases for users of payday loans died Thursday. Democrats moved the bill, sponsored by Sen. Rollie Heath, D-Boulder, from its scheduled committee Tuesday where, after weeks of heavy input from constituents, legislators stopped the bill that had an uncertain future in the Senate.
“Despite the desperate and aggressive efforts of payday lending industry lobbyists, progressive advocates engaged the community for months to ensure that our senators understood the implications of HB 1290,” said Corrine Fowler from the Colorado Progressive Coalition. “We thank each and every member of the General Assembly who listened to their constituents and stood up against the industry lobbyists and for this important consumer protection measure.”
Heath contended his bill embodied the intent of an amendment he negotiated last year, which he said was subsequently misinterpreted by the attorney general’s office. The Democratically controlled Senate Local Government Committee said whether Heath’s intent was misinterpreted or not they had no interest in increasing the fees on a class of people already suffering from financial strain.
The bill, which sailed through the House, would have removed a provision currently in place that allows borrowers to receive a prorated refund of fees paid when purchasing a six-month loan. Currently, borrowers who pay off a $300 loan in 30 days will pay $21.25, which amounts to an annual percentage rate (APR) of 86 percent. The new legislation would have increased the fee to $71.25 on a 30-day loan, or an APR of 289 percent. If a borrower holds a loan for 180 days under either the proposed or current law, they will pay $240 in fees and interest (162 percent APR) for the loan.
Heath said that destroying the industry was not his intent, adding that the industry is a needed resource for people. He said he simply wasn’t buying the argument that people were going to go to churches and family for loans as opposed to payday lenders. “They simply don’t want to,” Heath said.
A number of groups involved in the discussions last year said the bill as it has been implemented is what they had agreed upon.
“The two week, triple digit interest rate payday loan that traps so many borrowers in debt is gone from Colorado, and today we made sure these protections remain,” said Rich Jones of The Bell Policy Center.
Heath said his negotiations last year with payday lenders resulted in a deal that allowed lenders to keep a stipulated origination fee that he said was fair. Payday loan detractors however, said the Heath bill would have actually increased the APR on those wanting to pay a loan back in two weeks.
“I would not have negotiated something that made it worse,” Heath said. Heath explained that he expected that the attorney general would eventually overturn a ruling on the statutory language he created.
The bill is dead for this year.