payday lending

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While Feds Loosen Payday Loan Regulations, Colorado Voters Could Clamp Down

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In a year when the federal government is dialing back financial regulations, Colorado could become the 16th state to limit the notoriously high interest rates on payday loans.
BY  | AUGUST 30, 2018
(Shutterstock)

For a summary of November's most important ballot measures, click here.

As the federal government walks back historic regulations on payday lending, Colorado voters this fall will be asked to tighten them -- a sign that strong consumer protections are increasingly being left to the states.

Short-term loans, often called payday loans because they’re due on the borrower’s next payday, have average interest rates of 129 percent in Colorado. Nationally, rates average between 150 percent and more than 600 percent a year. A ballot proposal, which was certified as Initiative 126 by the secretary of state on Tuesday, would cap those rates at 36 percent. If passed, Colorado would be the 16th state, plus the District of Columbia, to limit payday loan rates.

Facing 652% Interest Rates, South Dakota Voters Regulate Payday Lending

They joined the growing number of states that regulate the industry that critics say traps poor people in a cycle of debt.
BY  | NOVEMBER 9, 2016

In South Dakota, where payday loan interest rates average a whopping 652 percent and are among the highest in the nation, voters have struck back by approving a 36 percent rate cap.

With more than half of precincts reporting Tuesday night, results showed voters approved the move to regulate the industry by a margin of three to one. More than a dozen other states have enacted a similar cap on loan interest rates.

Critics of the payday industry say lenders prey upon low-income borrowers who are unable to access financing from mainstream banks. These borrowers, they claim, easily get trapped in a cycle of debt. Payday lenders, however, argue that they fill a critical hole in the economy by allowing people with poor credit to get emergency loans.

The push for the rate cap was led by South Dakotans for Responsible Lending, which also fended off a rival measure placed on the ballot more recently and backed by the payday lending industry. That measure proposed an 18 percent cap -- unless the borrower agreed to a higher rate. Opponents said the measure was intentionally misleading and would have essentially legalized sky-high interest rates for payday borrowers in South Dakota.

Like the Industry, Payday Loan Ballot Measures Mislead Voters

In South Dakota, two seemingly identical initiatives in November would have vastly different outcomes for consumers' interest rates.
BY  | AUGUST 24, 2016

Annual interest rates on payday loans in South Dakota are among the highest in the nation -- a whopping 652 percent on average. Yet the business is booming there with nearly 100 stores across the sparsely populated state.

Critics of the industry say lenders prey upon low-income borrowers who are unable to access financing from mainstream banks. These borrowers, they claim, easily get trapped into a cycle of debt. Payday lenders, however, argue that they fill a critical hole in the economy by allowing people with poor credit to get emergency loans.

South Dakota voters have the chance to regulate the industry in November. But two seemingly identical proposals that would have vastly different outcomes are complicating the effort to rein in high interest rate