Feb 8, 2008 8:37 am US/Mountain
Bill Would Cap Payday Loan Interest Rates At 36%
DENVER (AP) ―
State lawmakers are considering a proposal to limit what payday lenders can charge their customers and stop people from being able to get multiple short-term loans.
The bill (House Bill 1310) would cap the annual interest rate at 36 percent for all payday loans, the same limit the Pentagon has set for companies that lend to members of the military, state Rep. Mike Farrandino, D-Denver, said Thursday.
Currently, people are limited to borrowing $500 at a time from payday lenders, but there's nothing to stop them from getting multiple loans by going to different lenders. The bill would require lenders to check a database to see if someone already owes money before making a new loan.
Linda Medlock of Denver said that when she needed $900 to pay her mortgage because of a problem with her refinancing, she borrowed $500 from two different lenders. She said it took her four years to pay off the second $500 loan and she ended up paying the lender $4,000.
Chris Walsh, a manager of a Check Into Cash store in Denver, said lenders wouldn't be able to stay in business if they were capped at 36 percent. He said his store charges $75 to borrow $500 but includes finance charges if the money can't be paid back right away.
Payday loans give some people a chance to pay their rent and their bills and remain in their homes, he said.
"We're actually still doing them a favor. Without this service they wouldn't know what to do," Walsh said.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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