Colorado Changes Law to Keep Payday Loan Stores

By: Javi Calderon
Colorado Changes Law to Keep Payday Loan Stores

In a rushed three-day session the Colorado House of Representatives passed legislation changing last year’s HB 1351 on Tuesday, March 29th with a vote of 36-27.

HB 1351 legislates interest rates and fees for direct deposit or payday loans. It allowed for a $21.25 finance charge on loans of $300 for 30 days and capped the maximum interest rate at 36% APR. If the borrower managed to pay back their loan early they received a prorated amount of their $21.25 back.

The new bill, HB 1290, raises the fee to $71.25 and changed the terminology from “finance charge” to “non-refundable origination fee.” The change in jargon is as significant as the $50 increase in fees.

Representative Larry Liston, sponsor of HB 1290, claims that the low fees outlined by HB 1351 put over 140 payday loan stores out of business in one year alone, thus putting people out of work and leaving families who relied on those financial products scrambling for options.

The $50 increase in fees and the non-refundable clause are intended to keep payday lenders open and somewhat dissuade consumers from using cash advance loans.

Liston believes the original bill was written hastily, but with the new amendment is now fair to both lenders and consumers.

Representative Mark Ferrandino sponsored the original bill, HB 1351, and claims that it was never supposed to carry such a high fee. He believes the non-refundable clause now dissuades borrowers from paying the loan back early, and the extra fees will amount to higher interest and higher costs for an already struggling consumer.

To add to the debate, Representative Andy Kerr offered that payday advance stores have been declining in popularity since 2007, with over 100 stores shutting down in 2009 before HB 1351 was even introduced.