Ferrandino wins key battle in payday loan war
Thursday, April 15, 2010 at 2:00 pm
DENVER– Denver Democrat Mark Ferrandino’s effort to rein in the payday loan industry came under heavy fire on the House floor Thursday by Democrats and Republicans who say they fear the regulations the bill would impose would destroy the payday loan industry and throw workers unto the unemployment rolls, a line of attack advanced defiantly by payday lobbyists here for weeks. On the floor today, more lawmakers thought the payday industry, which offers short-term loans characterized by high interest and fast-rising fees, should be regulated. Ferrandino’s bloc prevailed by just one vote.
Ferrandino said the point of his bill was to end the ever-deepening financial hole customers fall into and can’t get out, a debt trap the business depends upon. One loan begets another which begets another, he said. “When we talk about repeat customers here, we’re talking about a cycle of debt.”
The vote today mirrored votes in Washington this year in that the bill’s future hinged on swing Democrats. Republicans had lined up against the bill in lockstep. The bill’s success turned on the votes cast by fence-sitting Democrats like Debbie Bennefield, Sue Schafer, Ed Casso, Claire Levy, Joe Rice, Jeanne Labuda and
Jim Riesberg. *
Comparing payday lending to alcohol, Republican Bob Gardner told the assembly that regulation wasn’t the answer. “Lets teach people how to use it but lets not regulate it out of town,” he said, without elaborating on how the state would provide such instruction.
Ferrandino and a coalition of consumer protection groups reworked the bill last week, raising the upper limit interest rates the law would allow payday stores to charge. In its current form, the bill would allow lenders to charge $10 per every $100 it lends for first loans and 45 percent of the loan amounts after that. Lenders say that interest rates sound high but that’s because they’re being compared to long-term loan rates. Payday loans are meant to be paid back in days and weeks not months and years. They say Ferrandino’s bill would throw 1,600 employees out of work and take away access to credit.
The bill’s supporters say the industry functions on escalating debt that prevents people from gaining access to less expensive forms of credit.
“Are there people who got into bad cycles of debt? Yes. But that’s their own choice,” said Brian Del Grosso, R-Loveland.
Rep. Steve King, R-Grand Junction, said that constituents have called him to plead for continued access to payday loans. “Don’t take this chance away from me. This is a way to solve my problems.” He said one of his constituents dropped a slogan in favor of the payday industry: “Don’t abuse; I use it!”
Rep. Joe Rice, D-Littleton, who has stood against the legislation from the beginning, asked for an amendment to send the bill back to the House Buisness and Labor affairs. Ferrandino told lawmakers that the Rice amendment was a ploy to kill the bill because the Business and Labor committee had lined up the votes to kill the bill. Ferrandino urged a no vote and the amendment died on the floor.
“What are we coming to when profits are seen as bad?” Rep. Larry Liston, R-Colorado Springs, said.
Ferrandino said he was pleased the bill made it out of the House alive.
Reps Ed Casso and Claire Levy voted in favor of the bill. Debbie Bennefield, Sue Schafer, Joe Rice, Jeanne Labuda and Jim Riesberg voted against the bill. The bill passed 32-31.
NOTE: An editing error lumped Rep. Jim Reisberg in with the fence-sitters on the bill. He opposed it from the beginning.