House Bill 1351, the payday lending reform bill, passed the final hurdle today with the House concurring on the Senate amendments. . . . Payday loans can now be paid back in six months, rather than two weeks. Borrowers will now have a reasonable amount of time to pay back their loan without the two week time bomb constantly ticking, forcing them to take loan after loan.
HB 1351 includes an entirely new fee structure. The six month loan term and 45% APR does come with an origination fee and monthly processing fee. The borrower can pay back the loan at any time during the six month period and pay only the fees and interest due. Borrowers will pay 67% less in fees on a $300 loan[.]
From the Colorado Progressive Coalition press release.
The primary sponsors of the legislation were Representative Mark Ferrandino and Senator Chris Romer, both of Denver. The bill still needs the approval of Governor Ritter to become law.
The total financing charge will still be very high compared to any form of conventional lending, but the change is a major one and a positive one.
5 comments:
I am amused that the Colorado legislature website still provides bills in Word Perfect format. I know federal government agencies in DC were still using Word Perfect when I left the DC area in 2006. It's as if governments were early adopters for word processing, standardized on Word Perfect, and consider Microsoft Word a passing fad (even though it's over 20 years old).
Anyway, I wonder if US Bank will have to change its lending practices. I was shocked when I saw they had the guts to actually state 120% APR on their website, for fees of lending money against a check that hasn't cleared yet.
http://redtape.msnbc.com/2009/11/with-the-federal-reserve-ordering-severe-constraints-on-bank-overdraft-fees-and-congress-considering-even-tougher-rules-us.html
I doubt that U.S. Bank would be impacted. Their consumer lending is governed by the Uniform Consumer Credit Code which is generally more stringent that the interest rate limitations that apply to either payday lenders or to lenders in isolated transactions who aren't in the business of making loans.
The nominal interest rate from a bank generally can't be more than 36% (v. 45% of payday lenders and low volume private lenders or lenders in non-consumer transactions) and the high APR is probably due to loan fees in fairly short term, low dollar amount loans.
http://www.usbank.com/cgi_w/cfm/personal/products_and_services/checking/GUIDE_CAA_110109.pdf
• You are charged a fee of $2 for every $20 that you borrow. This is an Annual Percentage Rate (APR) of 120%.
• The fee is based on the amount you borrow, not how many times or
how long it takes for you to repay.
(For example, if you take one advance for $100, the fee is $10. If you advance $20, five times for a total of $100, you will also be charged a total of $10 in fees. The fee is the same.)
• The fee is assessed at the time of each advance and is collected by
the bank when your payment is made.
• Whether your payment is made 1 day after the advance or 35 days later, the fee does not change.
Here's a hyperlink
Checking Account Advance
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