An organization called Coloradans to Stop Predatory Payday Loans has submitted nearly twice the number of signatures required to get a payday lending initiative on the November ballot. If approved, the measure would impose a 36 percent cap on loans that can sometimes charge interest as high as 200 percent.
"We're looking forward to giving the voters of Colorado the opportunity to set this right," says Corrine Fowler, the campaign manager and proponent for the initiative. "We want to stop predatory lending in our state and ensure that all lenders have to play by the same rules."
At this writing, the Colorado Secretary of State's Office hasn't officially approved the initiative. However, Fowler reveals that her group submitted 188,045 signatures. Since the number of valid signatures required is a little over 98,000, Fowler concedes, "We are feeling really confident."
The current text of the document is accessible below in its entirety. But its introduction reads:
The people of this state find and declare that payday lenders are charging up to 200 percent annually for payday loans and that excess charges on such loans can lead Colorado families into a debt trap of repeat borrowing. It is the intent of the people to lower the maximum authorized finance charge for payday loans to an annual percentage rate of 36 percent.
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There are plenty of payday loan stores in Colorado at present. Indeed, initiative backers held a rally in front of an ACE Cash Express branch in the metro area earlier this month to announce the number of signatures collected. Among the speakers was Rev. Dr. Anne Rice-Jones of Lakewood's Rose of Sharon Tabernacle and the Greater Metro Denver Ministerial Alliance — and Fowler stresses that "we're receiving strong support from members of the faith community."
Fowler pins the reason for the availability of such loans in Colorado on "the Deferred Deposit Loan Act. It was passed by the legislature in 2000 and created an exemption for payday lenders to charge exorbitant interest rates and operate outside the state usury law" for loans less than $500. She adds that similar bills were passed "in many states around that time. But since the late 1990s and early 2000s, fifteen states have taken action to cap the interest rate at 36 percent or lower, and four states — Arizona, Ohio, Montana and South Dakota — have taken action on the ballot. So we're following the lead of these other states — because we believe Coloradans can do better."
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The payday lending initiatives that preceded the one in Colorado were extremely popular, she emphasizes. "They passed in all four of those states with overwhelming support, and it's very bipartisan. They're all red states, conservative-leaning states, but it passed in all of them, because it's irrational to allow a lender to charge triple-digit interest."
The victims of such loans are mostly "working families," Fowler argues. "To get a loan, you have to be employed. You have to prove you have a source of income and a bank account, because you have to provide the payday lender access to it so they can pull funds directly out of it — which is something most people don't realize. These are people struggling to make ends meet in an economy that's really lopsided. Because we have unaffordable and either low or stagnant wages, a lot of people can't make it to the end of the month, so they take a payday loan. But the average payday loan is $392, and people are paying as much as $129 of that in interest. So they'll take out a new loan to pay off the old one, but they're hardly able to keep up with the interest and are never able to pay down the principal. That's why it's called the cycle of debt."
The major arguments against such legislation are made by the lenders themselves, Fowler maintains. "They argue that they're going to go out of business. But in other states, we've found that while some of them have closed their doors, a lot of others have adjusted their models. In North Carolina, a state that did this in the early 2000s, ACE Cash Express still operates there — but they do check-cashing and money-wiring and different financial services. So we haven't seen this as having a negative impact on the availability of credit for households. It's actually been a positive, because people are finding traditional ways of accessing credit that don't leave them in a debt trap that leads to bankruptcy and people losing their accounts to overdraft fees."
Click to read the text of the payday lending initiative.