Rep. Jovan Melton,
D-Aurora
Gov. John Hickenlooper has three official requests on his desk to veto , legislation that adjusts the cap on subprime loans allowing 36 percent on a $3,000 loan.
The bill was introduced near the end of the session and sailed through. Groups that oppose it say they didn’t have time to make their case and want a veto in order to give the proposal more debate next year.
The legislation affects subprime interest loans that exist between payday lenders and traditional lines of credit, such as banks or credit unions. The borrowing limit on a payday loan is $500 in Colorado, with a term of no more than six months. These loans, which require proof of ability to pay it back, allows the borrower to re-establish good credit and qualify for traditional loans in the future. Supervised loans, as they’re officially called, range from $1,500 to $10,000. They carry higher interest rates than conventional loans, but much lower than payday loans, title loans or pawn shops.
Since 2000, the rate has been 36 percent for the first $1,000, 21 percent for $1,001 to $3,000 and 15 percent for everything above that. In the final week of the session, the General Assembly lowered the cap to 36 percent up to $3,000, 21 percent from $3,000.01 to $5,000, then 15 percent after that.
“In a legislative session that was supposed to be about the middle class, this bill moves Colorado in the wrong direction,” states the joint veto request from The Bell Policy Center, ProgressNow Colorado, the Colorado Center on Law & Policy and the Colorado Progressive Coalition.
“We wish this bill had come up earlier in the session to allow more time for conversations with legislators and a greater opportunity for the views of average Coloradans to be heard. Your veto of HB15-1390 will help protect low- to moderate-income Coloradans from detrimental credit products. The Legislature can address this issue again next session in a manner that ensures all viewpoints are heard and more measured deliberations take place.”
The Bell Policy Center submitted a veto request on its own, as well, and the Colorado chapter of the left-leaning Small Business Majority also asked Hickenlooper to shelve the bill.
Hickenlooper hasn’t yet taken a position.
“We just received it last week and our policy and legal teams are still analyzing the language and the policy behind the bill,” said his spokeswoman, Kathy Green.
At its April 29 hearing before the House Business Affairs and Labor Committee, Rep. Jovan Melton, D-Aurora, said the bill was needed to help sustain an important source of credit for people with few means or a bad credit history. He said without companies willing to take on those loans, people would seek out predatory lenders who charge interest rates much higher without helping people restore their credit rating.
“There are certain alternatives we want to make sure remain viable in Colorado, so these individuals can not only have access to resources they need but also can build credit and move their futures forward,” he said.
The brackets haven’t been changed in 15 years ago, he said.
Jones presented data that showed the companies making the loans are highly profitable and the loans are still popular. Lenders’ cost of borrowing money also remains low.
According to a last December, there were 42,817 standard supervised loans worth $630.3 million in 2013, which was more than in 2011 or 2012. A decade ago, there were 106,629 such loans worth almost $1.9 billion.
Jones, like others who oppose resetting the interest brackets, support the purpose of the loans and the current rates. They oppose the added cost to borrowers who already are having a tough time.
“The last thing we need is more high-cost unaffordable credit products,” Jones told the committee.
The bill passed the House committee 13-0, then the full House 62-2. It passed out of its Senate committee 4-0 and then, on the last day of the session, passed the Senate 20-15.
