Fact check: Does Colorado law enable payday loan providers to charge over 200% interest on tiny loans?
A Colorado team campaigning to restrict prices for what they call pay day loans claims that “current legislation permits payday lenders 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 finance that is annual at 36 % for small-dollar loans. 2
Could be the claim by the combined group avoid Predatory payday advances valid? Does present legislation enable payday loan providers to charge significantly more than 200 per cent interest for tiny loans?
No, the claim is inaccurate. First, the combined group’s mention of the 200 per cent 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 law presently enables four distinct kinds: 1) a flat-fee origination cost; 2) mortgage loan to not go beyond 45 per cent yearly placed on the total amount financed; 3) a month-to-month upkeep charge in line with the quantity lent; and 4) a one-time only fee of $25 for non-sufficient funds (in other words., whenever a borrower’s check into the lender does not yet determined). 3
2nd, the 200% interest cited by the combined group pertains to loans that stay unpaid after year. Nonetheless, simply 0.2 % for the loans that are small-dollar Colorado in 2015 had been written for starters year; almost 83 per cent were written for six or seven months. 4