After weeks of heavy deliberation, the Colorado Senate Local Government Committee has decided to stop the progress of a Bill designed to raise the costs of obtaining a payday loan.
While the Bill’s sponsor, Senator Rolle Heath, argued that the bill was intended to dissuade borrowers from pursuing payday loans, other legislators were opposed to increasing the costs of a product typically used by those who are already struggling financially.
Heath also contested that the Bill, which passed easily in the House of Representatives at the end of March, was an improved version of an amendment he had fought for last year that has been misinterpreted by the Colorado State attorney general’s office.
If enacted, HB 1290 would have increased the maximum fee for cash advance loans to $71.50 from $21.50 and removed a provision that currently allows consumers to receive a prorated amount of their fees back if they pay their loan back early.
Heath explained that his goal is to strengthen the short-term loan industry, not dissolve it. He believes people in need of fast cash or credit would rather turn to non-traditional financial products than friends, family or hardship programs. By increasing the fees in a matter he believes is fair he aims to give citizens more options.
According to sources, HB 1351 (which preceded HB 1290) has put over 140 payday advance stores out of business in the one year it has been active. HB 1351 set an interest cap of 36% APR on interest loans. This rate makes processing and offering loans unprofitable, essentially purposely putting the industry out of business. Heath’s $50 fee increase was intended as a fair balance, keeping interest rates low, but allowing lenders to profit for their services.
Heath also stated that he would not have argued for anything that would have created more hardships for the consumer.