A controversy over payday-lending regulations has escalated after the two Democratic lawmakers behind the industry overhaul said the Republican attorney general’s staff has favored lenders when it comes to fees.
Attorney General John Suthers’ office is charged with crafting regulations that cap what lenders can charge on six-month loans.
The dispute comes as Suthers is engaged in a re-election bid against Democrat Stan Garnett, who has accused Suthers of improperly accepting campaign donations from payday lenders while his staff drafted the regulations.
A third Democrat is defending Suthers’ office.
Sen. Rollie Heath, D-Boulder, said a rule related to loan-origination fees — the rule now criticized by the bill sponsors — exactly reflects what he and others meant to approve.
Heath amended House Bill 1351 to allow for the fees, which he said were “meant to be nonrefundable.”
“There were two things I was trying to do. There is a place for this industry, and it was certainly not my intention to kill it,” he said. “On the other hand, we had to create something that was a lot more fair for the average person.”
Heath said Suthers nonetheless showed poor judgment in accepting $10,350 in industry contributions.
Denver Democrats Rep. Mark Ferrandino and Sen. Chris Romer, who sponsored the bill, say lenders should have to refund a portion of the loan-origination fee to borrowers who repay their debts early.
Although the first draft of the regulations required the refunds, a later draft said the fee — as much as $75 on a $500 loan — isn’t refundable.
The change gives lenders an incentive to entice customers to take out as many loans as possible, said Ferrandino, who envisions people borrowing new money to pay off outstanding loan debts.
“It . . . basically guts the intent of the law,” Ferrandino said. “The intent of the law was to try to protect consumers. If there’s a way that payday lenders are making more money, it’s not fulfilling the intent of the bill.”
Contradicting amendments added in the final days of the session make the law tough to decipher, said Assistant Attorney General Laura Udis. When there is a conflict, rule drafters look to what lawmakers intended, Udis said.
She took a first stab at interpreting the law but said she changed her mind on the loan-origination fee after talking to people involved in drafting the bill and its amendments.
Suthers didn’t try to influence her decision, Udis said.
“We really were just trying to figure out what to do when you have a statute with conflicting requirements and trying to figure out what the legislature intended,” Udis said.
Jessica Fender: 303-954-1244 or jfender@denverpost.com
