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Today, the Colorado Secretary of State’s office confirmed that the Coloradans to Stop Predatory Payday Loans campaign, which CoPIRG is on the steering committee of, submitted enough signatures and Proposition 111 will be on the ballot this November. Proposition 111 will decrease the interest and fees that Coloradan’s pay for payday loans from an APR of 214 percent down to 36 percent, bringing payday loans under the same 36 percent usury cap that every other financial product follows in Colorado.
“A 200 percent APR is ridiculous, unconscionable, and needs to be reined in,” said Danny Katz, CoPIRG Director. “This fall, because of the hard work of a broad coalition, Coloradans will have the chance to stop these predatory payday lenders.”
Payday loans are small loans with extremely high APRs. For example, a Colorado payday loan borrower pays an average of $119 in fees and interest to borrow $392. That’s an average annual percentage rate (APR) of 129 percent but it can go as high as 214 percent. When a borrower takes out a payday loan, the payday lender gains access to their bank accounts, meaning they can collect their fees regardless of whether people have the money to pay.
Payday loans too often lead struggling Coloradans into cycles of debt by charging fees and interest on loans that make repayment very difficult. The ballot measure is supported by a broad and diverse coalition including faith leaders, veterans, advocates for low-income families and consumers.
“Now we can turn our attention to educating Colorado voters so they know they have a chance to rein in predatory payday loans this Election Day,” said Katz.
Fifteen states and the District of Columbia already stop predatory payday lending within their borders by enforcing interest rates caps of 36 percent or less. Studies have shown that access to credit doesn’t change in states that cap interest rates.
After North Carolina closed payday lending completely, studies found that there was no significant impact on the availability of credit for households. Former payday borrowers there and in other payday-free states report that they now build on savings and cut back on expenses, as well as access other resources that are much cheaper and less harmful than payday loans.
Colorado will now join four other states that put this initiative on their ballot, including Arizona, Ohio, Montana and South Dakota, where interest rate caps passed overwhelmingly.
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