Lawmakers begin to take positions on Colorado payday regulation

State Rep. Sue Schafer, D-Wheat Ridge, like other Democrats, is a payday loan fence-sitter. She sees the need to protect consumers from abuses but she also sees the need for short-term credit. Schafer is calling for credit unions to create emergency loan programs and she told the Colorado Independent she felt Denver Democrat Mark Ferrandino’s bill that seeks to regulate the payday industry, HB 1351, should be laid over until lawmakers can come up with a better solution. Schafer said she felt the threat of losing payday jobs was a real concern.

Flickr: Stallio
Flickr: Stallio

“What we are doing is pitting low-income borrowers against low-income employees,” Schafer said.

Payday lenders and payday industry lobbyists have said that a 36 percent interest rate cap on short-term loans would force contraction in the market and could lead to the loss of 1600 jobs in the state. Ferrandino agreed that evidence from other states demonstrated some contraction was likely to occur but that the industry would survive.

One of three Democrats singled out by the payday opposition, Schafer said she might support a bill with a higher interest-rate cap. As part of that solution, she also called for payday lenders to diversify their product, which she said may help provide other revenue streams and allow lenders to lower rates for borrowers.

“So, what’s the proper interest rate that they can continue to operate on and make a reasonable profit with?” Schafer asked. Her thoughts echoed those of Gunnison Rep. Kathleen Curry, who told the Colorado Independent she was doing her own math to establish where she stood on the bill and how she might change it. She said data from both sides of the issue seemed skewed.

Currently payday lenders are allowed to take up to $20 on every hundred dollars they lend up to $300. After that, they can charge 7.5 percent up to $500. While the typical loan is only for 18 days and averages around 318 percent, borrowers often borrow from other payday lenders in order to pay the first payday lender back, falling into a doomed cycle of debt.

Schafer says access to credit is vital.

“People who need money are going to go somewhere to get it They could run up a credit card that has a really high interest rate on it. They can bounce a check which has a very high interest rate on it. So I am really torn on the vote.” She said people might also turn to unregulated internet lenders.

Ferrandino said that any company operating in the state must comply with Colorado law. He cited a recent case against internet lenders won by the Colorado Attorney General’s office.

Beyond arguments of rate fixing, Schafer, who noted that she was not just a legislator but also a business woman, said there is a philosophical issue of how much individuals should be curtailed from living their lives as they see fit. She said she doesn’t like the fact that low-income individuals underwrite a large portion of the gambling industry but that it’s a matter of choice.

“To what degree should the government regulate how you as an adult spend your money? I still am waiting to see a bill.”

In the end, Shaffer said she has not spoken with Ferrandino concerning any of possible amendments he and the Colorado Progressive Coalition, among others, have been working on to sway members like herself. 

She told the Colorado Independent that, as it is now, “I would rather hold the bill over and come up with a better solution.”

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