A group of consumer advocates in Colorado have cleared their last legal hurdle toward having a ballot initiative added that would seek to establish an interest rate cap on payday loans made in the state.
The state’s Supreme Court recently dismissed a challenge from payday lenders, clearing the way for a coalition of advocates to try and gather the 98,492 signatures needed to have their measure added to the November ballot. The signatures are needed by August 6.
A number of states have set interest rate caps of 36% on payday loans, despite comments from lenders that claim the lower interest rates eliminate their profit margins. Lenders have opted to leave states that have enacted similar caps. In South Dakota, for example, half of the payday lenders there opted not to renew their licenses after the state instituted a 36% cap in 2016.
Payday lenders argue that they provide a valuable service to individuals — access to short-term funding that is not available anywhere else. Colorado lawmakers attempted to institute a 36% cap back in 2010 but were unsuccessful and the state has not tried since.
Lenders in Colorado can charge up to 45% interest in addition to a finance fee — equal to 20% on first $300 and then 7.5% on the remaining amount up to $500 — and a maintenance fee.