Feb 25, 2008 7:53 am US/Mountain
State Lawmakers Take On Payday Loan Companies
DENVER (CBS4) ―
State lawmakers in Colorado want to crack down on the fast growing payday loan industry. The state Legislature will consider a bill this week that would cap the interest rate stores can charge.
The loan companies can currently charge more than 500 percent interest on a payday loan. They also can let borrowers take out more loans, even if they haven't paid back the first one.
Lawmakers said 65 percent of payday loans in 2006 were not paid back in Colorado.
"It basically sets the interest cap at 45 percent, which is the state usury law and allows them to charge a one time origination fee of $60," said state Rep. Mark Ferrandino, D-Thornton.
The payday loan companies are fighting back by taking out newspaper ads and putting up other signs that claim they offer a "clearly needed service."
The companies said limiting the interest rate would "force all lenders to close," which would "take away the financial choices" and rights of the Colorado consumer. They claim borrowers would then turn to "other risky options."
The Payday Lending Reform Act, House Bill 1310, goes before the state House for a third reading this week. If it passes, the legislation then moves to the state Senate for approval.
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