Colorado Payday Loan Store
Residents of Colorado are about to have restrictions placed on their ability to use payday loan products to solve their temporary financial challenges. A Democratic sponsored bill (there they go again) was sent to the Colorado Governor for his signature Tuesday.
The House backed a new version of the bill by one vote. It changes short-term payday loans – with typical terms of just a week or two until the borrower’s next payday – into six-month loans.
Lenders would still be able to charge a $75 origination fee as well as monthly fees up to $30 and up to 45 percent in interest, but consumers have more flexibility with repayment plans.
In essence, the new bill if passed, will allow the payday loan product to continue to exist in Colorado but, with the extended repayment plan available to consumers, may reduce the number of brick-n-mortars existing in the state. There is little doubt that the payday loan Internet companies will address this new situation aggressively.
Too bad; if only the legislators and regulators would realize that by placing more and more restrictions on ALL financial products, they limit consumer access to a spectrum of products at competitive rates.
There is little doubt by payday loan industry pundits that this Colorado legislation was pushed hard by the banks and credit unions. They desire payday loan consumers because they’re lucrative having jobs and bank accounts. After all, lacking these characteristics precludes consumers from using payday loans to solve their financial problems in the first place.
And as usual during discussions of this bill, the media resorted to their typical misstatements regarding the payday loan industry; poorly regulated, no disclosure of fees and rates, consumer difficulty in understanding the payday loan product. All completely wrong of course! In every independent study done on this subject consumers have consistently stated their appreciation for industry disclosure, ease of use, and speed of negotiating through the paper work; unlike banks and credit unions and installment lenders and on and on.
The bill CO H.B. 1351 would require lenders to make loans for six months at a time. Additionally, and to give borrowers the flexibility to repay earlier. Lenders would still be able to charge a $75 origination fee in the first month followed by monthly fees of $7.50 per $100 borrowed – up to a maximum of $30 – and up to 45 percent annual interest. Under those terms, a borrower would pay $337.50 to borrow $500 if they waited until the end of six months to pay.
The government has done such a wonderful job in the past of dictating every aspect of our lives. Now we let them dictate where we can borrow a few hundred dollars. This makes me ill!
Payday Loans,Personal Loans & Cash Advances Online-Money ! When You Need it Most
Thank you!
Why so much for some loan dollars though? 45 percent annual interest? The government is really ‘speechless’.
45% APR. It’s much higher than that. There is risk. The realty is 8% to 12% per month on the loan principal collateralized by the car/motorcycle/RV
Jeremy, you make some good points! When do you suppose other alternative products will be introduced in the market place and successfully drive the payday loan lenders out of business? Oh yeah, I forgot! The Feds have actually funded a few and the city of San Francisco as well. They ALL failed! Weird huh?
That’s funny how you say “use loans to solve financial problems.” Loans only solve a problem when you take them out. For examply, you need to pay in full to have a broken tooth removed but the oral surgeon fee is $500, and you live paycheck to paycheck with no credit. No oral surgeon in Colorado does a payment plan, and with no/bad credit, you won’t qualify for the health plan “credit card.” So, you take out a payday loan or live in agony for a year. (No one would choose to live with nerves exposed in their mouth for a year to try to save up money, so don’t lie.)
Now you are paying $75 ever two weeks. If you’re lucky, your loan store has the payment plan option after your 4th on time payment. If you’re not, then they have that “pay off and wait 5 business days” option. So then you either find a new store to re-borrow that $500 or you go on the payment plan of like $96 for six paycheckes, but the interest stops accumulating.
Under this new law, from what I understand, if you take out $500, then they charge you $75. So your loan is $575. Now you have 6 months to pay it off. If you make one payment monthly, that’s the same as the payment plan, $96. But, you also get a $30 fee every month, which is $126, then add the interest on top of that, which is about $22, (may be shakey on this one.) So now you have to pay $148 if you want to pay once a month, where $75 twice a mont (if you are paid bi-monthly) which turns out to be $150 once a month. This means, for people who are paid monthly, their fee is doubled. For people paid weekly, their fee is reduced by half. But, in the end, the payday loan store is only losing out about $2 per bi-monthly paid customer.
If you cut it into 12 payments, that’s $48 + 15 + 22 = $85, which bumps up your payment $10 every paycheck. That doesn’t really help.
So, this law helps no one and the loan stores won’t suffer too much. They should have done it the original way, $50 origination fee plus 45% interest. That is what would help. And, although it gives you the “flexable” payment option, you know that it will be a set payment rate. It won’t be, “Oh, I can pay $60 this month because it’s my kid’s birthday, and pay extra next month to make up for it.” No, it won’t.
Oh, by the way, if loans were cheaper and actually helped with financial problems, the people who use them would feel more secure when they need a loan that they would be able to pay it back. That means, they would be more likely to get a loan to begin with, which means more customer volume, which means more money. Instead, it’s just the same old BS to a much more confusing tune.
So much for free enterprise, This makes me a little sick too!