New laws intended to limit the short term money loans offered in Colorado are going to go into effect. New caps will be put on payday loan direct lenders in Colorado. Legislators had called for a stronger bill, but lobbyists had been pushing for a weaker bill.
Limiting interest rates
Annual interest rates on personal debt loans in Colorado will be limited to 45 percent annual interest rates. Like most pay day advance loan products, the term of the loan is much shorter than a year, but interest rates are often calculated on an annual basis. The current loan limits in Colorado are set at 300 percent annual interest. Legislators were pushing for a 30 percent cap, though lenders pointed out that high administration costs and default rates made offering loans at that rate very difficult.
The longer terms required on loans
Short term installment loans in Colorado presently have terms between seven and thirty days. When the new legislation goes into effect in August, that term can be extended. The minimum term a lender can offer will be six months. Borrowers will also have to be offered the ability to repay the loan early.
Carrying and originating the loan
The borrowers who offer these loans in Colorado could be allowed to charge fees for originating and carrying the loan. Lenders will be allowed to charge an origination fee of $ 75, and monthly fees of $ 7.50 per $ 100 borrowed, up to $ 30 maximum.
The debate over payday cash advances in Colorado
In almost each state, the paydayloans debate has been heavy. Some individuals say the pay day loans industry should be banned entirely. Just one vote made the main difference in passing the Colorado bill. No matter what, payday loans will continue to be a controversial issue for most state legislators.
