Proposed payday loan rule ‘absurd,’ says Ritter’s attorney
Proposed new rules for payday lending companies are being attacked by the industry as well as people who want to see stricter regulations.
Gov. Bill Ritter’s chief legal counsel, Craig Welling, called one of the rules “absurd,” but payday lending companies say other parts go beyond a new law calling for them in the first place.
Although that law went into effect earlier this month, the rules governing it still are being drafted by the Colorado Attorney General’s Office.
A final hearing of the proposed rules is scheduled for Tuesday.
The new law is designed to limit the amount of fees and interest rates payday lenders can charge.
Under the old law, those fees and rates could amount to as much as 520 percent per year. The new law limits fees to $7.50 a month for every $100 loaned, and an interest rate of no more than 45 percent.
In a letter to Attorney General John Suthers’ office this week, Welling said one rule could result in fees and rates far higher than allowed under the old law.
“A borrower who repaid a loan ... would pay a $60 nonrefundable finance charge (on a $300, two-week loan) as well as $5.19 in prorated interest, for a total 565 percent annual percentage rate,” Welling wrote.
“Increasing the annual percentage rate from 520 percent to 565 percent would frustrate legislative intent to the point of absurdity.”
An advocacy group, Coloradans for Payday Lending Reform, echoed Welling’s comments in a similar letter, saying that’s not what the Colorado Legislature intended when it approved the new law during this year’s session.
Meanwhile, several payday lending companies and their attorneys argued against other aspects of the rules in letters of their own, saying that the proposed rules go beyond what was called for under the new law.
One of the rules would require the companies to refer customers to other payday firms if the lender doesn’t offer the kind of repayment plan they want.
“We are aware of no law which requires a lender or other business to refer potential customers to a competitor,” wrote Greenwood Village attorney Janice Clark, who represents the Colorado Financial Services Association.
The proposed rules have come under scrutiny recently after The Daily Sentinel reported earlier this month that Suthers’ re-election campaign accepted more than $10,000 in a two-week period from 11 payday-lending companies while his office is drafting the rules.
Suthers’ spokesman, Mike Saccone, said the attorney general has exerted no direct control over the drafting process.