Bill Effectively Puts Colorado Companies out of Business

Posted On: August 22, 2010 at 10:56 a.m.

Filed Under: apr colorado personal loan

A few days ago I reported a new bill that has been passed in Colorado, capping payday and other similar personal loans at 45%. While 45% may sound like a high interest rate for a loan, the fact is companies cannot make a profit on that with operating costs. So, this new law basically shuts down the business of payday loans in Colorado. Here is the most recent update coming from PR Newswire: “Recently in Colorado House Bill 1351 passed which caps APRs for Payday Loans at a mere 45%, which effectively eliminates the possibility of offering payday loans at a rate that would even merely cover operating expenses, let alone account for the relatively high number of customers that default on these loans. For payday lenders, even direct internet lenders such as Payday Loan Trust, this means they will no longer continue to offer these short-term loans to residents in Colorado. [[ads]] Typically payday loan customers are short on cash between paychecks and just need a little extra to get by until their next paycheck, many of whom have a less than perfect credit score and have literally no other options for short-term credit during these times. And although payday loans are a tightly regulated and fully disclosed financial product, these customers in Colorado will no longer have the freedom to choose a short-term loan when they decide it may help. Now, the payday loan option will be replaced by “installment” loans of $500 at a period of 6 months” (http://www.prnewswire.com/news-releases/new-colorado-bill-has-many-payday-lenders-closing-or-turning-to-installment-loans-100705649.html). What will this law mean on a national scale? How will those individuals who need money in emergency situations get by?