Denver Democratic Rep. Mark Ferrandino this morning told radio host David Sirota that Coloradans should demand state Republican Speaker of the House Frank McNulty strip out the last-minute amendment his caucus added to the annual rule-making bill in order to roll back payday loan fee regulations put in place last year. Ferrandino said Republicans were playing chicken with billions of dollars in Colorado business revenue just to cater to one special-interest group.
“Call [McNulty’s] office and tell him: Don’t hold the legislative process hostage for the payday loan industry,” he told Sirota’s AM 760 drive-time listeners.
The rulemaking bill, SB 78, extends hundreds of regulations passed by the legislature that govern industries across the economic spectrum in the state. Passing the bill is a formal exercise but an important one and rarely an arena where lawmakers look to wage fraught battles over controversial legislation.
“[Greenhouse emissions] standards [concern] $85 million for businesses. The hunting season in Colorado generates $1 billion,” said Ferrandino. If the legislature fails to extend hunting rules, there will be no hunting season this year, he said, “and they’re doing this just to save one special interest group [money]… to raise payday loan interest rates from 80 percent to 200 percent.”
If passed in the House, the rule-making bill with the payday amendment attached would head back to the Democratic-controlled Senate, where the amendment would surely be stripped out. Then, because it has been altered, the bill would go back to the Republican-controlled House for “concurrence” or to be passed in its final form. Then it would be sent to the governor to be signed into law.
“Call Speaker McNulty’s office and tell him to strip out that amendment or to concur with the Senate version of the bill,” Ferrandino told listeners.
Yesterday afternoon, as news broke that House Republicans had attached the controversial amendment in the last hours of the legislative session, Governor John Hickenlooper called the act “irresponsible” and a “poison pill,” saying it was no way to make law.
The rule-making bill must be passed, so a special session of the legislature may be called to deal with the payday loan amendment if lawmakers can’t come to agreement. That session would also cost taxpayer’s money.
The controversy turns on regulations put in place last year by House Bill 1351, sponsored by Ferrandino and then-Democratic Senator Chris Romer, who is now running for Mayor of Denver. The bill aimed to reduce short-term loan rollover practices that wrack up fees and interest and see debt soar for payday customers.
The bill forced payday lenders to refund part of the so-called loan origination or acquisition fees when borrowers repay loans early. Lenders want to keep the fees.
Supporters of the regulation said allowing lenders to keep the fees would move the industry to craft loan products and strategies that steer consumers to take out new loans so lenders can collect repeat origination fees. Churning loans– in effect taking loans to pay loans– generates a steady stream of fee and interest revenue for lenders but it captures borrowers in a cascading debt cycle, which was the problem Ferrandino’s bill sought to address.
The industry lobby battled hard against the regulations in the legislature last year and during the attorney general rule-making process later that summer. They have returned to fight for regulation rollbacks this year as well.
Republicans this year, mostly citing the need to protect payday industry jobs, sponsored HB 1290, which would have thinned the fee regulations, but that bill was voted down.
The amendment added to SB 78 yesterday afternoon by Colorado Springs Republican Bob Gardner was a brazen last-minute second-chance for the payday industry this session.
Defenders of the amendment and the McNulty-Gardner last-minute legislative tactic say “bureaucrats” in the attorney general’s office “exceeded the authority granted to them by the legislature.”
In the special rule-writing hearing last summer the attorney general’s office charged with interpreting the rules passed by the legislature ultimately sided with the bill sponsors Ferrandino and Romer on the fee regulation.
Longtime financial industry rule-writer First Assistant Attorney General Laura Udis said the ambiguity surrounding the fee rule came as a result of conflicting language in the bill.
“Where there was one fee for consumers, now there are three,” she said after taking hours of testimony and weighing the regulations for weeks. “There is language concerning the origination fee and the interest and the monthly fee,” she said.
In deciding in the end against industry concerns, she said consumer protection was more in line with the spirit of the law passed by the legislators.