Colorado payday loan regulation battle moves backstage

DENVER– The war to regulate payday loans in Colorado continues behind the scenes at the capitol here. Lobbyists and lawmakers are working hard to shore up votes for and against legislation introduced by Denver Democrats Rep. Mark Ferrandino and Sen. Chris Romer weeks ago. The bill is stalled for now as negotiations over proposed amendments continue.


“We are working the bill hard,” Ferrandino told the Colorado Independent. “And, as you know, the other side is definitely working it hard, too.”

Ferrandino laid the bill over after heated debate erupted around it on the floor of the House last Thursday, leading him to believe the bill might fail to pass.

In its current state, HB 1021 would strip payday lenders of special exceptions to state usury laws. Those exceptions allow Colorado payday lenders to charge between 300 percent and 500 percent interest on their short-term loans. Borrowers who fall behind on payments quickly see fines and rates escalate and descend into a debt spiral and often bankruptcy.

The debate in the House Thursday turned on whether a 19-day payday loan of up to $500, now available at an average 340 percent interest rate, should be restricted to 36 percent interest rate, the rate cap that guides all other lending institutions in the state.

Payday industry representatives have argued that the proposed rate cap would put 1,600 pay day workers on the unemployment rolls and end access to short-term credit for Coloradans who don’t qualify for bank or credit union loans.

Many lawmakers, Democrats and Republicans, dismissed those arguments as overblown.¬†Ferrandino said they were paltry justifications for “predatory practices” that trap a distressed population in debt. The short-term credit offered at payday stores, he said, was cheese for a trap that produces windfall profits on the backs of people often struggling to make it day to day.

Ferrandino is ready to tweak the bill, though, to ensure its passage.

“We are trying to look at possible alternatives and trying to see what people might be willing to support,” Ferrandino said. “So we are just going to spend our time talking to members to figure out what the strategy is.”

Ferrandino said that the group he has been working with on the legislation from the beginning– a group that includes the Colorado Progress Coalition and the Colorado Latino Forum– was looking at options that included considering promoting data base systems to better track laws that prevent borrowers from rolling over payday loans and amendments that would considerably weaken proposed rate regulations.

“At the end of the day, I want a bill that is going to protect consumers from getting stuck in this cycle of debt. If we can get something that does that, then we will move forward with the bill,” Ferrandino said.

Corrine Fowler, economic justice director for the Colorado Progressive Coalition, was more specific.

“The coalition has discussed a compromise. But we have yet to come to consensus about the amendments that we would be willing to support. I will say that a reasonable cap on the [annual percentage interest rate] is the bottom line. Without that, we will no longer support [the legislation],”

Ferrandino said he didn’t want to see a replay of what happened to a similar bill he introduced in the past. He said that bill was “hijacked in the Senate.”

“That bill ended up being better for the industry than even current law is.”

If that happens again, he said, he would withdraw his own support for the bill.

Fowler told the Colorado Independent that the coalition was actively working to bring around lawmakers who remained on the fence, including Kathleen Curry, I-Gunnison, Sue Schafer, D-Wheat Ridge, and Nancy Todd, D-Aurora.

Ferrandino added that they would also like to see Democrats who actively spoke out against the bill to reexamine it. He mentioned Joe Rice, Littleton, Debbie Benefield, Aravada, and Jim Riesberg of Greeley.

Rice told the Colorado Independent that he was concerned that the bill would force the payday industry to fold here and shunt payday customers onto the even less regulated internet.

Ferrandino said that in Colorado internet lending was not legal and that past lawsuits have directly countered attempts to lend on the internet.

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