CoPIRG
announces the release of a new report which surveyed 30 payday lenders
in Colorado and reviews the state of the industry after the passage of
the Colorado Deferred Deposit Loan Act of 2000. The report finds that
the payday loan industry continues to gouge consumers with an average
annual interest rate of 451.7%.
"Consumers
who turn to payday lenders for quick cash end up paying triple digit
interest rates that would make a loan shark blush," stated Emily
Hoopes, CoPIRG Consumer Advocate
Last
year the Colorado General Assembly authorized payday lending with the
passage of the Colorado Deferred Deposit Loan Act (DDLA). Deferred
deposit loans are also called payday loans, they are small loans based
on a personal check held for deposit. The DDLA was adopted as an
article in the Uniform Consumer Credit Code (UCC), and took effect on
July 1, 2000. The passage of the DDLA created a sub-category of lending
and the regulations that apply to it; essentially authorizing payday
loans explicitly and attempted to set limits to protect consumers.
The
CoPIRG report provides background on the industry nation-wide, an
update on payday loan legislation in states across the country, and a
survey of 30 payday lenders in Colorado. The survey findings show that
the DDLA has not increased protections for consumer when taking out a
payday loan. Payday lenders in Colorado continue to make short-term
loans of $100-$500 at legal interest rates between 182% -520%. The
report also finds that the national trend of payday lenders partnering
with national banks and thrifts in order to preempt state laws has made
its way to Colorado. ACE Cash Express who has partnered with Goleta
National Bank and Loan Mart who has partnered with Eagle National Bank
both allow between 3-4 rollovers of loans when the DDLA prohibits more
than one rollover. The report also finds that fee disclosure's required
by the Colorado DDLA are insufficient in alerting consumers prior to
completing a loan transaction, to the pitfalls and high fees of a
payday loan.
"The
fee limits and disclosure requirements set up by the law are not enough
for Colorado consumers. CoPIRG calls on the Colorado legislature to
protect consumers from these predatory lending practices by passing
tougher legislation", stated CoPIRG Consumer Advocate, Emily Hoopes.
CoPIRG
urges Colorado legislatures to revise state statues to hold payday
lenders to the small loan annual interest rate of 36% that all other
lenders must abide by. CoPIRG recommends that cash-strapped consumers
avoid the high costs and risks of using payday loans.
