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El Comercio de Colorado

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Usury lenders get nervous

Usury lenders get nervous

Usury lenders get nervous
May 10
11:24 2018

Newsroom/El Comercio de Colorado

The Supreme Court of Colorado ruled in favor of including a ballot measure that relates to usury in Colorado. Initiative 126 seeks that voters approve a cap to the interest rate charged for payday loans. Currently, these short-term loans are exempt from the 36 per cent cap established by the laws of Colorado. The current exemption allows certain lenders to charge interest rates that surpass 200 per cent.

A group of people dedicated to offer payday loans was hoping to stop Initiative 126 from being included on the ballots. But with this court decision, the Colorado Financial Equity Coalition, organization who is coordinating the initiative, will be able to continue with it. “We’re pleased with the Supreme Court’s decision to allow Initiative 126 to move forward,” says Lizeth Chacon, executive director for the Colorado People’s Alliance.

“It’s no surprise payday lenders don’t want Coloradans to have the chance to vote for an interest rate cap, because most people know payday lending carries triple-digit interest rates and traps low- and moderate-income people in a devastating cycle of debt,” Chacon says. Those who support the initiative are confident that Colorado voters will follow the example of voters in Montana, Arizona, Ohio, and Dakota del Sur, who have approved similar measures.

Vicious cycle

Short-term payday loans of up to $500 strip $50 million per year in interest and fees from financially-strapped Coloradans. This profitable busines, however, creates a lot of problems for those who use it. The average loan of $392 costs customers an average $119 in interest and fees to borrow money for 97 days. With a default rate of 23 percent — almost 1 in 4 loans — many customers face insufficient funds and overdraft fees, collection efforts, and even bankruptcy for a loan that was supposed to help them through a shortfall.

“Payday lenders make the dishonest claim that they are simply filling a need,” says Rosemary Lytle, president of the NAACP State Conference. “In fact, payday lending traps people in debt they can’t afford, extending and deepening their financial distress. It is a particular menace for communities of color, who find payday lending stores dotting their neighborhoods much more prevalently than even lower income white neighborhoods. The NAACP has a long history of opposing this financial predation.”

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Edición Virtual | #330 | 17 de Enero 2019

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