YES on Proposition 111. It’s time to end predatory payday loans in Colorado once and for all.
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Current law allows payday lenders to charge more than 200% interest for small loans targeted at customers who are often in dire straits. Payday lenders take advantage of Colorado communities and trap working families in a cycle of debt. This ballot initiative will cap interest rates on payday loans, ending the outrageous interest charged to borrowers who can least afford it.
Proposition 111 is a measure on the 2018 ballot in Colorado asking voters to cap interest rates on payday loans at 36% inclusive of fees.
Let Voters Decide
Payday lenders take $50 million per year from financially-strapped Coloradans.
Payday lenders’ business model relies on making loans borrowers cannot pay back without reborrowing – and paying even more fees and interest. Payday lenders have the ability to seize money right out of borrowers’ bank accounts. Many customers are forced into a cycle of taking these loans out one after another, spending more than half the year in high-cost debt. The average loan costs customers $119 in interest and fees, just to borrow $392 for 97 days. With a default rate of 23 percent–almost 1 in 4 loans–many customers then face insufficient funds and overdraft fees, collection efforts, and even bankruptcy for a loan that was supposed to help them through a shortfall. This is a massive drain on Colorado’s economy, sending millions of dollars to out of state corporations that otherwise would be spent in the local economy.
Capping rates on payday loans simply requires lenders play by fair lending rules.
Payday lenders can currently charge an effective interest rate of over 200% because these loans are exempt from state usury laws. By capping the APR (annual percentage rate) at 36% inclusive of fees, the Stop Predatory Payday Loans initiative would make payday loans subject to the same top interest rate allowed for other loans in Colorado. A total of 15 states plus D.C. have ended the payday lending debt trap by capping rates at 36 percent or less, inclusive of fees.
Main Street vs. Wall Street.
Colorado voters can stop payday lenders from taking advantage of vulnerable families. Payday lenders aren’t small businesses, they’re a billion-dollar industry of out-of-state companies bankrolled by Wall Street investors. They’ve spent millions lobbying Washington and Colorado politicians to write rules that enable them to scam hardworking Coloradans.
Payday Loans in Colorado Today
Predatory payday loans have a short but ugly history in Colorado. Out of state payday lenders flocked to Colorado because of a loophole passed by the legislature in 2000, which exempted them from having to charge reasonable interest rates. These lenders started to cluster in low-income neighborhoods, preying on hard-working Coloradans. In 2010, the Colorado General Assembly passed basic reforms to regulate fees and extend the repayment terms of payday loans. Despite those reforms, payday lenders are still able to charge effective interest rates over 200% APR, trapping borrowers in a cycle of debt.