Fewer Colorado consumers turned to high-interest payday loans last year. But those who did borrowed larger amounts.
The number of consumers taking out payday loans dropped nearly 8 percent to 279,570 in 2009 compared with 2008, according to a subprime- lending report Thursday by the Colorado attorney general’s office, which notes that the number may be overstated because some consumers borrowed from multiple lenders.
The total amount of loans in 2009 grew nearly 2 percent to $576 million.
Higher unemployment and cutbacks in discretionary spending contributed to the reduction in people taking out payday loans, state and industry officials said. Without a recent paycheck or benefits check, consumers can’t qualify for a payday loan.
“Approximately half of our business used to be from those customers that come in and say, ‘I want to go to Vegas,’ ‘I want to go skiing’ or ‘I’m going to take a vacation.’ Those types of loans — we call them fun loans — have significantly reduced in number,” said Bill Fritts, owner of Emergency Cash in Denver.
Payday loans are capped at $500. The number of loans that defaulted dropped to 8.8 percent in 2009 from 10.3 percent in 2008.
Fritts said his store’s business has increased this year because of less competition. A number of payday lenders shuttered after the passage of a bill that limits fees and interest rates on loans.
There are 411 payday-lending stores in Colorado, down from 505 at the end of 2009, said Laura Udis, first assistant attorney general for the consumer-credit unit.
The new regulations, which took effect in August, require a minimum loan term of six months. Previously, the typical loan term was two weeks, with consumers paying up to $75 each time they couldn’t repay a loan and had to roll it over. That would amount to $900 in fees if a borrower extended a $500, two-week loan for six months.
Now, lenders can collect only a one-time origination fee of $75 and charge 45 percent interest over the life of the loan. They can also collect a monthly maintenance fee of up to $30 starting in the second month.
Under the new regulations, if a $500 loan is carried for the entire six months, maximum fees paid would be $292.
Borrowers can repay a loan early without penalty.
Andy Vuong: 303-954-1209, avuong@denverpost.com or
