Payday loan customers could see drastically lower interest rates if a bill scheduled to hit the Capitol Monday can overcome barriers that unraveled a similar plan two years ago.
The legislation would let Colorado voters in 2010 decide whether to cap at 36 percent annual interest rates, which can now climb higher than 300 percent on the small sums.
Opponents predict a complete shuttering of the payday lending industry in Colorado should the proposal succeed.
Too many Coloradans like North Denver’s Tobias Serrano find themselves trapped under mounting debt as a result of interest on payday loans, proponents say.
Serrano, an auto mechanic who works on commission, borrowed $400 from a payday lender in November to pay his gas bill. The advance cost him $720 in the following months, he said.
“I knew I was making a deal with the devil, but I still had to make a deal. I had to have heat in my house,” said Serrano, who works with one of the community groups supporting the measure. “Payday loans as they exist now are predatory.”
Several dozen payday loan employees appeared Sunday at the bill announcement carrying placards asking lawmakers to save their jobs. An estimated 600 payday lending stores operate in Colorado.
Ron Rockvam, president of the Colorado Financial Service Centers Association, said he expects those doors to close and 1,600 employees to find themselves jobless should the proposal pass.
“This is not reform, this is an outright ban on the industry,” Rockvam said.
His industry provides a vital service, said Rockvam, pointing to options like loan repayment plans that help mitigate the debt burden.
Several other states that have imposed interest rate caps have seen marked drops in the number of loan stores within their borders, though proponents of the legislation say credit unions and other institutions have filled those low-income lending vacuums.
A similar proposal in Colorado faced heavy opposition from lenders and small business advocates in 2008, ultimately unraveling under numerous amendments. In 2009, plans for payday lending reform fell apart before a bill could be drafted.
Re-introducing the idea as a referred measure that gives voters the final say could ease some angst among lawmakers, advocates say.
And in a climate where voters are still angry with the financial services industry and where credit card reforms passed easily, Rockvam worries about his industry becoming a scapegoat, he said.
Rep. Mark Ferrandino, D-Denver, plans to introduce the bill.
“People need access to responsible credit, not predatory credit,” Ferrandino said. “They talk about jobs, but jobs at what cost? Bleeding hardworking Coloradans dry?”
Jessica Fender: 303-954-1244 or jfender@denverpost.com.
