The number of payday lenders and the amount they loaned continued to grow at double-digit rates last year, according to a report released Monday by the state attorney general’s office.
Payday lenders make money by offering quick cash loans with high interest rates. According to the report:
Payday lenders made almost $500 million in loans last year to 250,000 Colorado consumers – an increase of 34 percent from 2004 and 101 percent from 2002.
The average payday loan was just more than $300. It was to be repaid in 18 days, with an average annual interest rate of 345 percent. That compares with a 380 percent average annual rate in 2004.
About 15 percent of borrowers had 13 or more payday loans, which means they were in debt to those lenders for at least six months of the year.
The report also showed an increase in small-installment loans, which are loans of less than $1,000 and carry terms between 90 days and 12 months. Traditional supervised loans, which are subprime consumer loans with interest rates above 12 percent, also rose.
“These reports indicate that the number of Coloradans borrowing money has increased from last year in all categories of lending we regulate,” said John Suthers, Colorado’s attorney general.
Suthers said the report’s findings show there are scores of “financially distressed people who need to borrow money on a short-term basis.”
He said it is up to the state legislature and consumer groups to decide if the industry needs additional regulation.
Critics say payday lenders prey on low-income workers, charging them exorbitant fees.
Payday lenders contend that the industry fills a need and that its outlets can also be found in more-affluent neighborhoods.
Some borrowers find themselves bouncing from one payday loan to the next, said Jordan Ash, director of financial issues for the Association of Community Organizations for Reform Now, a national consumer group based in New Orleans.
“The industry is set up to keep people trapped and to get them deeper in debt,” Ash said.
Staff writer Will Shanley can be reached at 303-954-1260 or wshanley@denverpost.com.
