Senate OKs bill to lower rates on payday loans
DENVER — Although it’s watered down from the version that left the Colorado House last month, a measure to lower interest rates for payday lenders narrowly won approval in the Senate on Friday.
Instead of a 45 percent cap on the interest rate payday lenders could charge, senators opted for a fee structure that would allow for as much as twice that rate.
As written now, House Bill 1351 would allow lenders to charge an initial $75 fee on a maximum $500 loan, and $30 a month after that for as many as six months.
Borrowers could extend that loan for another six months at the same rate, but they could do that only once.
As a result, their annual interest rate would be 135 percent, far less then the maximum 391 percent they can charge now. When the bill was first introduced in February, it called for a 36 percent cap.
“The important thing to remember is this still breaks the cycle of debt, and that’s what we’re after,” said Sen. Rollie Heath, D-Boulder.
Republicans locked horns with Democrats over the measure, saying it would put the lenders out of business.
Sen. Kevin Lundberg, R-Berthoud, said that while capping the interest rate might seem like the right thing to do, it isn’t because of the jobs that might be lost.
“Even if you think the state is somehow capable in managing everyone’s lives in an efficient and effective and compassionate way, no, it’s the absolute opposite,” Lundberg said. “It’s the cold, strong arm of government forcing people out of their jobs, forcing businesses out of the state.”
Despite three Democrats joining Republicans against the bill, it passed 18-17.
Sen. Lois Tochtrop, D-Thornton, said people who use payday lenders know what they’re getting into, but have little choice because they need cash and have nowhere else to turn.
She said the measure would end up hurting the very people the bill’s proponents are trying to protect because it will lead many to turn to loan sharks to get the cash they need.
“If we close these businesses, there’s going to be somebody else that’s going to come in, and they’re going to provide these loans, and that is known as organized crime,” Tochtrop said. “When people need the money, they need it, and they’re going to go to any means. Then they’re going to have broken legs and won’t have the money to fix that, either.”
The measure heads back to the House for a final vote.