The Colorado House on Monday narrowly approved a bill to limit how much payday lenders could charge borrowers for small, short-term loans.
House Bill 1310, sponsored by Rep. Mark Ferrandino, D-Denver, would cap the annual percentage rate on payday loans at 45 percent and allow lenders to charge no more than $60 per year in finance charges on the initial loan. It would ban prepayment penalties.
The bill passed on a 33-30 vote. It now heads to the Senate for consideration.
Payday loans are short-term loans on small amounts of money, typically $300 to $500, that are intended to be paid back after the borrower receives his or her next paycheck.
Supporters of HB 1310 said that borrowers become trapped by high interest rates, averaging 350 percent or more, and spend years trying to repay the loan.
Let's "not incentivize the continued rollover of debt," Ferrandino said Monday.
Opponents said the bill would put many payday lenders out of business. Without access to the loans, low-income borrowers may face equal or worse pain from credit card finance charges, bank overdraft fees and other consequences of falling short of cash, they said.
"Where are these people going to turn? The banks won't lend them money," said Rep. Larry Liston, R-Colorado Springs.
Source:http://www.bizjournals.com/denver/stories/2008/02/25/daily8.html
