Fact check: Does Colorado legislation enable payday loan providers to charge over 200% interest on small loans?
A Colorado team campaigning to restrict costs for whatever they call pay day loans claims that “current legislation enables payday loan providers to charge a lot more than 200% interest for little loans geared towards clients that are usually in serious straits.” 1 The claim is with in support of Proposition 111, a Colorado ballot measure to cap yearly finance fees at 36 per cent for small-dollar loans. 2
Could be the claim because of the group avoid Predatory payday advances valid? Does current law enable payday loan providers to charge significantly more than 200 % interest for little loans?
No, the claim is inaccurate. First, the combined team’s mention of the 200 % interest conflates rates of interest with finance fees. The attention price is just among the fees which may be levied on that loan, and Colorado legislation presently enables four distinct types: 1) an origination that is flat-fee; 2) mortgage loan not to ever meet or exceed 45 per cent annually put on the quantity financed; 3) a month-to-month upkeep cost on the basis of the quantity lent; and 4) a one-time only cost of $25 for non-sufficient funds (for example., whenever a borrower’s check to your loan provider does not clear). 3
2nd, the 200% interest cited by the group pertains to loans that stay unpaid after one year. Nevertheless, just 0.2 % regarding the small-dollar loans in Colorado in 2015 had been written for just one year; almost 83 % had been written for six or seven months. 4