CHANGES MAY KILL PAYDAY LOAN BILL

0 Comments | Gazette, The (Colorado Springs), Mar 26, 2008 | by MICHAEL DAVIDSON

DENVER - The Senate changed a bill that would regulate the payday loan industry Tuesday, and now its House sponsor may ask his colleagues to scuttle the controversial measure.

The chamber held its floor debate on HB1310, which would cap the annual interest rate payday lenders can charge customers to 45 percent -- far lower than the current rate of approximately 329 percent APR. The measure would also prevent individuals from taking out more than one loan simultaneously and would allow a lender to charge a fee only when the loan is taken out but not when it is extended.

The bill has become one of the most contentious of the session. Supporters say that the payday loan industry preys on the poor and that the bill will prevent future borrowers from becoming trapped in a vicious debt circle. Opponents argue it will force the industry to leave Colorado and take 1,800 jobs with it.

The Senate voted for an amendment removing the provision that prevents lenders from charging additional fees each time a loan is renewed. The amendment's author, Sen. Jennifer Veiga, D-Denver, said that change should help lenders stay in the black. Representatives of the industry are split as to whether the changes would be enough, she said.

Veiga says she thinks the compromise will save the bill, but its primary author sees it as a potential poison pill.

"The bill's lost a lot of its strength," Rep. Mark Ferrandino, D- Denver, said. He said he will ask the House to not approve the amendments and instead form a conference committee. If he can't get the amendment pulled, Ferrandino said he is willing to see the bill die and try again next year.

"I want real reform," he said. "If it doesn't come to that, I don't think it's a bill we want to pass."

The bill's sponsor in the Senate, Senate President Peter Groff, D- Denver, said that he is also unhappy with the changes.

Veiga, who has spoken against the bill at pro-industry rallies, added additional provisions to the bill. The loan period has been shortened to seven days, down from the proposed 30. A 10-cent surcharge would be added to each loan, with the funds going to establish financial literacy programs, and the government would be required to review the bill's effect on the industry in three years.

The Senate seems ready to support the bill. It voted 19-16 to approve the amended version that will go to the Senate Appropriations Committee, which must approve the provision creating the financial literacy programs. A number of hurdles remain. The Senate must reconsider the bill to approve the committee's changes, and the bill likely will be assigned to a conference committee, where the two houses will try to work out their differences. Details

HB1310 has become one of the most contentious of the session. Supporters say that the payday loan industry preys on the poor and that the bill would prevent future borrowers from becoming trapped in a vicious debt circle. Opponents argue it will force the industry to leave Colorado and take 1,800 jobs with it.