The payday loan industry gouges Coloradans like it does Americans across the country, targeting mostly low-income single women, including military spouses. Denver Democratic state Rep. Mark Ferrandino tried and failed to introduce legislation in 2008 that would have curbed the worst of the abuses, where desperate borrowers take loans at hundreds of percent interest and enter a debt cycle they rarely are able to exit.
Ferrandino told the Colorado Independent he is considering trying again this year. He has worked with local consumer advocate groups to draft rough legislation but he is proceeding cautiously and is “not positive” yet whether he will actually introduce the legislation.
“If we can get through a bill this year that is meaningful and protects consumers from this predatory practice– If we think can do that, then we are going to introduce legislation,” he said. “I am up against a very strong lobbying core and they have a lot of money and a lot of influence down here. They have the ability to take any bill that is moving forward and shape it to their own interests and really stop any real reform. I want to make sure I have my ducks in a row before I go ahead on this.”
A first try
A Ferrandino payday regulation bill failed to pass in 2008 after Denver state Sen. Jennifer Veiga, a fellow Democrat, added amendments that the bills sponsors say gutted the bill.
According to Follow the Money’s database of campaign contributions, during the 2008 election cycle top receivers of Payday/Title loan money were Sen. Michael Kopp, R-Littleton, $1,800; Rep. Debbie Benefield, D-Arvada, $800; Al White, R-Hayden, $600; and Sen. Shawn Mitchell, R-Broomfield, $600. A number of legislators received up to $400 dollars, and Paychex contributed $3 to Denver Sen. Chris Romer’s campaign.
Cash for America, who along with Denise E. Bassford and his wife provided the majority of funds to General Assembly PACS and candidate campaigns in 2008, has so far donated only $400 to Josh Penry’s defunct campaign for governor.
A perfect topic for a referendum
Carlos Valverde, co-executive director for the Colorado Progressive Coalition, who has been working with Ferrandino on draft legislation, said that one way to avoid lobbyist pressures was to refer the bill to a vote of the people. One proposed draft of the legislation now is a referendum.
“We are very excited about it,” Valverde said. “We just got some polls back that said it is hugely supported between both Democrats and Republicans.”
Ferrandino agreed that a referendum might be the way to go. Lawmakers, he said, “are sometimes more willing to let the voters make that kind of a decision.”
Rich Jones, a director at the Bell Policy Center, said that his group has also been working with Ferrendino on possible legislation for this year’s session. He explained that his group would recommend imposing an interest rate cap of 36 percent on payday loans. He said similar rates have been adopted by both the federal government for Service members and their families in a number of states. In the case of the military, he said, the government has determined that payday loans were predatory and negatively affected the preparedness of the troops.
“I think that it is the cleanest and most straight forward manner of dealing with this issue. Thirty-six percent is the limit that credit unions, banks, retailers that offer credit– it is what everybody has to play by. Our view is that it’s a high enough interest rate that if you can’t make enough money at 36 percent, well then maybe there is a problem with the business model,” Jones said.
A blow to the state economy
Jones said that the loans negatively affect the state economy by targeting groups of individuals likely to fall into a debt cycle. He said targeted individuals typically earn roughly $25,000 per year and are often single mothers. He said once people enter the debt cycle, they often fail to emerge. He said that that the Center for Responsible Lending estimated that $80,000 million in excess fees is pulled from the Colorado economy by payday loans– money that might be otherwise spent on goods and services in the state. He said that in most cases, the money given to payday services goes to headquarters located beyond Colorado borders.
“While some of that money stays in Colorado through the employees of the store and so forth, the majority goes out of state.”
Ferrandino said he will continue to work on the issue.
“If you look at the practices of these business and the money that they take out of the state to line their own pockets using excessive fees placed on hardworking Coloradans, it hurts our economy and it hurts those families who are struggling to get by.”