Colo. House gives initial OK to limit payday loans
DENVER – The Colorado House gave initial approval Thursday to a bill that would limit payday loan rates after lawmakers said borrowers were getting into a vicious cycle of debt.
House Bill 1351 would limit interest rates to 45 percent annually, down from a maximum 300 percent. It also would allow lenders to charge a $50 fee once a year.
“This is trying to end the cycle of debt we see so much in this industry,” said Rep. Mark Ferrandino, a Democrat from Denver who is sponsoring the bill.
Rep. Max Tyler, a Democrat from Lakewood, said the industry makes a living from the misery of others.
“This is not an emergency loan, this is a way to keep people trapped in a cycle of debt,” Tyler told the House.
Opponents said the bill could cost the industry jobs at 487 payday loan offices across the state, forcing borrowers to go to unscrupulous lenders who are not regulated by the state.
“This legislation kills 1,600 jobs in Colorado,” said Rep. Steve King, a Republican from Grand Junction.
The attorney general’s office said the average payday borrower in Colorado refinances the same loan five times before paying off the original loan amount. In 2009, the average borrower paid $475.73 in total finance charges to borrow $366.97.
The bill faces a third reading before it goes to the Senate.