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!