This time it’s federal: Coloradans join national push for stricter payday loan regs

DENVER — Dressed like ebola aid workers in hazmat suits and bearing signs with toxic waste symbols, activists with the Colorado Progressive Coalition joined a national protest on Tuesday against payday loan abuses. The small group gathered in front of an Ace Cash Express on Colfax Ave., hoped to help push the Consumer Financial Protection Bureau to adopt the kind of strict rules taken up here in Colorado that might turn the payday loan experience into something more like a reasonable consumer exchange and less like a run through a personal finance minefield.

“I’ve been personally affected by this issue,” said protestor Fitzgerald Scott, who moved to Denver from Florida, where he rolled over a stubborn payday loan balance for six months.

“The lenders know the predicament people are in. They know people are going to have a problem paying these loans back, so they get to gain late charges,” said Scott. “That’s the predator part; they feed off a person who’s already sliding.”

Scott said that, when he was caught in the payday loan cycle, a third of his roughly $300 paycheck would disappear before he ever saw it.  That’s because allowing payday lenders to auto withdraw the borrowed funds is a common requirement for the loans. That practice is among those protestors are asking the CFPB to regulate.

“What the CFPB can do is things like requiring basic underwriting, limiting the number of days of indebtedness and especially ending the requirement to auto withdrawal,” said Caroline Casteel of CPC, who organized yesterday’s rally. “What that requirement is doing for a lot of people is making sure that the lenders get paid ahead of basic necessities.”

Casteel said that, although Colorado already enjoys fairly strong payday lending regulations, which were passed in 2010, she hopes the CFPB rule making will go a step further and apply to more people. She pointed out the state Attorney General’s office found that, even after the reforms, just over 20 percent of Colorado borrowers defaulted on their payday loans in 2013.

“In other states people are still seeing interest rates that exceed 400 percent,” she said. “Even here in Colorado, with fees included, the APR is still in the triple digits, still around 188 percent. The default rate, as a result, is still very high and that indicates to us that it’s still a dangerous and unaffordable product.”

Former Speaker of the House Mark Ferrandino drafted Colorado’s reforms and said he’s unsure if the CFPB can go much further than the state. He said the feds aren’t allowed to use some of the regulatory measures put in place in Colorado, such as interest-rate capping. Even so, he noted that Colorado’s approach has been taken as a model by the CFPB and he agreed it’s time for tighter regulations.

“We’ve seen significant resources from payday lenders go into lobbying state legislatures across the country to make sure that legislation that would protect consumers was killed or gutted,” said Ferrandino. “It took me three years to get Colorado’s legislation passed at the cost of millions of dollars to consumers.”

“We’ve also seen the industry find ways to get around regulation and game the system,” he said. “More standard, national rules would help to lessen that game playing.”