If you haven’t experienced predatory payday lending, the topic may seem distant or unimportant, but as John Oliver (and other major news sources) memorably pointed out, these predatory loans are widespread and often destructive—Colorado now has the opportunity to pass a ballot initiative aimed at reining in these loans, and it is a move that every voter should be able to get behind.
Payday loans are short-term loans of relatively small amounts, and excessively high fees and interest rates often apply. Currently in Colorado, the average interest rate charged on one of these loans is 129 percent, an absurdly high figure that well exceeds the state’s 36 percent usury rate (not to mention that 129 percent is an average, and many have rates above it). Research from the Bell Policy Center has found that payday loans with high rates and fees can trap borrowers in cycles of debt since the interest owed on a loan for several hundred dollars can be several hundred dollars itself, and borrowers take out more loans before the pay period of their last. Minorities are disproportionately and unfairly affected.
A new ballot initiative in Colorado seeks to cap the payday lending interest rate at 36 percent, cutting the average by over half. Payday lending was reformed in the state in 2010 which brought down costs and extended the time frame of loans, and though this decreased the number of loans being issued, research has now shown that people are paying off one loan and simultaneously taking out another, finding a way around the intention of the reforms. Capping payday loan interest rates at the general rate would catch Colorado up to 15 other states that have also recognized the harm that these lenders are inflicting on the lives of borrowers.
The point of seeking a November ballot initiative is to leave the state legislature out of the process—interest groups of payday lenders would likely slow down reforms at this level since these lenders often have the ear of lawmakers. Fortunately, this is a ballot initiative that should be able to win support of voters—stopping lenders from charging interest rates that look like a Jeopardy! board is a reasonable thing to ask voters to do.
Predatory payday lending might seem like a vague and only semi-important problem for those fortunate enough to have never been targeted and trapped by debt and fees that continue to grow perpetually, but it is a practice that has no place in Colorado, or anywhere. We do have to acknowledge that payday loans provide relief for many borrowers, but lenders should not be able to draw in these borrowers further with high rates and more loans. Capping interest rates through a ballot initiative is something that voters should rally for, and this will also keep the issue from having to go through the legislature later. Even if it doesn’t impact you directly, keep an eye on this issue—voting on this issue in November will help to defend fellow Coloradans against future predatory lending.
