The advertisement says it all: Drive away with cash today. Deferred Deposit Loans, more commonly known as payday loans, promise borrowers quick and easy money. But that convenience comes at a cost.
According to the most recent data from the Colorado Attorney General’s Office, some 448,792 people borrowed money from payday lenders in 2015. For an average $400 loan, borrowers paid approximately $30 in interest, $35 in origination fees and $45 in monthly maintenance fees. By the AG’s calculation, that $111 in finance charges amounts to an effective annual percentage rate of 117 percent.
"Right now, payday lenders are exempted from the state usury rates and they’re able to charge triple-digit interest because of that exemption," said Corrine Fowler.
She is leading a petition drive to cap payday loan rates at 36 percent. Under current law, the maximum rate is 45 percent. Initiative 126 would also strip away existing provisions in statute that allow payday lenders to charge fees.
"We need more consumers and Coloradans to even understand what a payday loan is, to understand that it is triple digit interest and how unfair that is, and to be able to vote it in November," Fowler said.
She faces some competition with this petition drive, and it’s coming from the very industry she is trying to reform. Two other petitions were approved by the Secretary of State’s Office. Those petitions were authored by Bill Fritts, a payday lender, and attorney Sarah Mercer who is a registered lobbyist.
Initiative 183 would also reduce the maximum interest rate to 36 percent, but it would leave in place the organization and monthly maintenance fees. Initiative 184 would reduce the maximum monthly maintenance fee from $7.50 to $5.
"The initiatives basically keep the status quo for the current triple-digit interest," Fowler said. "We want to encourage voters to read their ballots carefully, as always and to make sure that they vote to cap the interest rate at 36 percent."
News 5 contacted Fritts by phone who declined to comment for our story. Mercer did not respond to voicemails left at her firm.