Prop. 111 Would Cap Payday Loan Interest
Proponents Target Reducing Cycle Of Debt
By Adam Uribes
GPHN Intern
It happens every day to working class men or women from Park Hill, and beyond. You’re working your 9 to 5 and an unexpected emergency happens. Maybe the water heater goes out, or the transmission finally kicks the bucket. You need cash, and quickly.
For many people, this is how they dip their toe in the waters of payday lending.
A payday loan is a short-term cash advance that gives people quick access to funds to get them through to their next pay period, no credit check required.
In Colorado, people who take out payday loans pay on average 129 percent rate. For example, a $500 loan could potentially snowball into $793 worth of debt. Nearly one in five people who take out these loans will eventually default on them, according to a Pew Payday Lending Figures analysis.
According to a ballot analysis, in 2016, loans in the state of Colorado totaled $166 million, and citizens who procured these loans paid $50 million in fees and charges.
The practices have led a group of activists to sponsor Proposition 111, on the statewide ballot, which would cap the annual percentage rate of payday loans to 36 percent. The measure would also eliminate some of the fees and pay structures that are associated with payday lending.
“I know people personally through the work that I have done who have just been completely ruined by payday loans,” said Prop. 111 Campaign Manager Corinne Fowler. “From lenders having access to sensitive information, like bank accounts, to triple digit interests rates that make it nearly impossible to pay back a loan as small as a few hundred dollars, these types of transactions are not worth the amount of heartbreak they can inflict.”
Rev. Annie Rice-Jones, another proponent, noted that other states have installed a 36 percent cap to payday loaners. And, 36 percent is the maximum cap allowed by credit card companies and other banking institutions.
Opponents of Prop. 111, however, say that reforms adopted in 2010 are adequate. Payday loans are now limited to $500 in Colorado. Refinements have also been added to allow borrowers to make installment payments, and fees refunded if the borrower pays the loan back early. Opponents also say payday lenders provide an important service that helps people who may not qualify for a regular bank loan.
A Google map search shows at least a dozen payday lenders currently in operation in and around the Park Hill neighborhood. When contacted, several of the lenders declined to comment on the ballot proposal, or referred calls to corporate offices, which did not respond to inquiries.