A bill to cap fees charged by payday lenders moved to the full Senate on Wednesday despite pleas from the industry that it would be killed off by the measure.
The Senate Judiciary voted 4-3, on a party line vote, in favor of House Bill 1310. The bill limits the annual interest rates on deferred deposit, or "payday" loans, to 45 percent. Currently, the fees charged on a payday loan translate to an annual percentage rate of more than 390 percent.
A coalition of political, social and religious groups has targeted the industry, saying it profits from customers trapped in a cycle of debt. Figures from the Colorado attorney general's office, which regulates payday lenders, estimates the "average" customer paid $573.06 in total finance charges to borrow $353.88 for about 51/2 months.
"A payday loan is not set up for success - it's set up so that you get into that cycle," said Dale Mingilton, a board member of Mile High United Way and a former banker.
Payday lenders, as well as their employees and customers, came out in force to testify against the bill. Employees expressed concern about their jobs, while customers testified that the loans got them through tough times.
Some lenders owned just one or two stores, like Richard Patnoe, who owns Cash Outlet in Longmont and Dacono. He makes very little on his utility-bill payment, money-order and Western Union services, he said, so if payday loan fees are cut, most of his profits will be, too.
"There seems to be the impression that some stores will stick around. Mine will not."
The hearing also attracted the CEOs of regional and national companies.
MoneyTree's Dennis Bassford said if the bill is approved, "I will be forced to close all 13 of my Colorado locations."
Senate President Peter Groff, D-Denver, the bill's sponsor, said the purpose wasn't to shut down the industry, though he was not concerned about lenders who would close.
"Innovative businesses" and credit unions "would step into the void," he said.
Source:http://www.rockymountainnews.com/news/2008/mar/06/payday-loan-bill-advances/
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1 comment:
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