Payday lending reform bill could go either way
By Marianne Goodland
The bill to lower interest rates charged by payday lenders is on hold while its sponsor waits for the right moment to get it out of the House.
House Bill 1351 had an abbreviated second reading hearing on the House floor on March 12 and the debate was tabled before the House could vote on it. The bill would limit the interest rate a lender could charge for a payday loan to 36 percent. Bill sponsors say currently, payday lenders can charge as much as 500 percent for a loan.
In 2008, a similar effort by state Rep. Mark Ferrandino, D-Denver, squeaked out of the House with six “no” votes from Democrats who are currently still in the House. That bill, HB 08-1310, died in the Senate. If the same six vote “no” on HB 1351, that would leave Ferrandino with a maximum of 31 “yes” votes from Democrats and he would need the vote of Rep. Kathleen Curry, I-Gunnison, and one Republican for the bill to get to the Senate. (Curry had voted in favor of HB 08-1310.)
During the March 12 debate, legislators talked about the heavy lobbying, in the form of letters and phone calls that they are getting from the faith community in support of the bill; and the payday lending industry, their employees and customers, who are in opposition.
Republican opponents of HB 1351 said the bill would cost Colorado 1,600 jobs. “We will pile on the problems we’ve already created,” said Rep. Mark Waller, R-Colorado Springs. “That’s not what we want to be doing in these economic times – chasing jobs out of Colorado.”
But the most impassioned arguments against HB 1351 came from two of the six Democrats who voted against HB 1310 two years ago: Rep. Jim Riesberg, D-Greeley; and Rep. Debbie Benefield, D-Arvada.
Riesberg gave a line-by-line review of all of the statutes that govern payday lenders, in response to claims by Ferrandino and other supporters of HB 1351 that the industry isn’t regulated sufficiently. He also accused Ferrandino of spreading misinformation about the industry, a charge that Ferrandino later rejected. “I have a strong passion for the truth,” Riesberg said. “We don’t debate [bills] on misinformation.” Riesberg noted a letter legislators received from the Colorado Catholic Conference, which said that payday lenders preyed on the poor and is unregulated, and that the conference stands for banks and other financial services that make a fair profit while considering the wellbeing of the consumer. Riesberg said banks charge 755 percent interest for overdraft protection, 965 percent for credit card late fees, and more than 1000 percent for overdraft fees, and no one is going after the banks over the high fees. People take out payday loans because they are desperate, Riesberg said; “everyone else has turned them away.” He also pointed out that since the federal government capped payday loans for military personnel at 36 percent, those loans have ended in Colorado, according to a report from the Attorney General. “When [payday lenders] are no longer here, where are those people who are desperate going to turn to? They’re not abusing what they were given the right to do,” he said.
Benefield drew gasps from the House when she referred to the lobbying from the Catholics as “crap.” She blamed the people who take out the loans for not knowing how to manage their money rather than blaming the payday lenders. “This bill does not solve the problem nor does it come close,” she said. The practice today is about individuals who don’t have good money management skills, have overextended their credit or don’t have the skill to get out of debt, Benefield said. The industry needs to be improved but HB 1351 is not the way to do it; she said the solution is a large database that will keep borrowers from getting loans from multiple lenders. “If you want to do right by citizens do not [believe] in bogus stuff about interest rates. It’s about individuals who don’t know how to manage money, going from one [lender] to another, and getting into further debt.”
Rep. Sal Pace, D-Pueblo, said he was convinced to change from a “no” to a “yes” by the employee of a payday lender store, who expressed concerns about customers who continually rollover loans, especially seniors who are on fixed incomes.
Wednesday, the House laid over the bill for the third time, now delaying further action until Friday, March 19. Part of the delay has been due to missing Democrats whose votes are imperative to the bill’s passage. The vote is so close that even one absent who is a “yes” vote could result in the bill’s defeat.
One of the possible actions for HB 1351 is to send it back to the committee for changes. However, which committee? Sen. Greg Brophy, R-Wray, said during a meeting with reporters on March 12 that he believed the bill would go to the House Business Affairs and Labor Committee, rather than to the Judiciary Committee that held hearings on HB 1351 last week, and the business committee’s intent would be to kill the bill. That committee is chaired by Rep. Joe Rice, D-Littleton, one of six current House Democrats who voted against HB 08-1310 and is considered a “no” vote on HB 1351.
However, Wednesday Ferrandino scoffed at the Republican idea as wishful thinking on their part. If the bill were going back to committee, he said, it would be to Judiciary and said that Republicans don’t have a say in that. Ferrandino said the idea of a strike-below is being discussed, and that would be something that would happen in committee rather than on the House floor, he told The Statesman.
Also on Wednesday, proponents of HB 1351 held a “Pray Day” in front of an ACE Cash Express store at 4th and Broadway in Denver. Reverend Patrick Demmer of Graham Memorial Church of God & Christ gave a sermon on the issue of usury, and asked that payday lenders stop preying on low- and moderate-income communities and communities of color.