Wednesday, March 26, 2008

Payday Loan Rate Cap Subject of Odd Senate Maneuvering

A controversial bill that would cap the interest rates and fees that could be charged by "payday lenders" received initial approval by the Senate Tuesday, but then the Senate reversed itself and, in an unexpected move, sent the bill back to committee.

HB 1310 has drawn vociferous opposition from the industry because it caps the annual interest rate that can be charged on short-term loans at 45%.

Under current law so-called "payday" lenders can charge fees that add up to an equivalent annual interest rate of 390%.

Data collected by the Office of the Attorney General indicates that the average borrower of a short-term loan was loaned $353.88 for a period of about 5 1/2 months. That average borrower paid $573.06 in finance charges.

The Senate, after approving the bill by voice vote in a close divide, sent it back to the appropriations committee to consider an amendment by Sen. Jennifer Veiga, D-Denver, requiring establishment of a financial literacy program. That program would be funded by a ten cent per loan fee.

The ill-fated vote to initially approve HB 1310 was 19-16, with Sen. Lois Tochtrop, D-Thornton, joining the Republicans in opposition.

Rep. Mark Ferrandino, D-Denver, and Senate president Peter Groff, D-Denver, are the principal sponsors of the measure.