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New Report: Coloradans Pay $119 to Borrow $392 Through Payday Lending

Wednesday, February 21, 2018
Ellen Harnick

Payday lenders strip $50 million per year from Colorado economy

DENVER, CO – The Center for Responsible Lending (CRL) released a report today showing that payday lenders charge Coloradans an average of $119 in fees and interest to borrow $392, with an average annual percentage rate (APR) of 129%. This practice strips $50 million per year from low-income Coloradans. The report analyzed data published by the Colorado Attorney General’s office.

Also today, a proposed initiative for the November ballot that would cap payday lending rates at 36% comes before the Colorado Initiatives and Title Board.

“The bulk of the $50 million in fees that payday lenders strip from Colorado's struggling families come from those who can least afford them,” said Ellen Harnick, Western Office Director for the Center for Responsible Lending. “We should not sacrifice the financial well-being of Colorado families for the sake of payday lenders, whose business model of making repeat high-cost loans to borrowers who cannot afford them is alive and well in Colorado.”

According to the websites of three of the largest payday lenders in Colorado, annual interest rates, or APR, can reach well above the 129% average, up to 215%. Payday lenders acquire access to the customer’s checking accounts, allowing them to create a cycle of debt. They take the money out regardless of whether there is enough money in the account to cover living expenses. Sometimes this leads to overdrafts or insufficient funds fees. Sometimes it compels the customer to take another loan to cover living expenses.

The average loan lasts 97 days, and some customers take out take these loans one after another, spending more than half the year indebted on these high-cost loans. Delinquency or default occurred in 23% of Colorado payday loans taken in 2016. These figures indicate a high level of distress for many payday customers, despite reforms enacted in 2010.

Last year, CRL found that payday loan stores are located in Colorado’s communities of color at higher frequencies than in white neighborhoods, even those with lower income levels.

"Payday lenders say they provide access to credit, but what they provide is access to unmanageable debt. The impact is especially hard on Colorado’s communities of color, where payday lending stores are located in higher numbers proportionally than in white neighborhoods. This widens the racial wealth gap as dollars are systematically drained from our communities,” said Rosemary Lytle, President of the NAACP State Conference.

The report was released at the headquarters of mpowered which serves more than 60,000 people and offers individual financial coaching, debt management plans, credit check-ups, and personal finance classes.

“Many of our participants have felt stuck in predatory loans,” said Britta Fisher, Executive Director of mpowered, a credit counseling service. “The rising financial stress can lead to despair. Our highest hope is that through financial coaching, people can take control of their financial life and find safe and affordable banking products.”

“Congress passed a 36% cap on annual interest rates for consumer loans made to active-duty military, protecting them and their family members,” said Leanne Wheeler, Principal of Wheeler Advisory Group, and 2VP of United Veterans Committee of Colorado, a veterans' advocacy group. “But veterans, who number more than 400,000 in Colorado, are still subject to triple-digit interest rates, even as too many of them struggle to regain their financial footing, after they transition from active duty.”

"As people of faith, we stand united against business practices and financial products that violate our shared values. The exploitative design of predatory lending is unacceptable to the just and peaceable society our traditions guide us to create. Capping payday loan interest rates is a vital step toward building a more equitable and inclusive Colorado,” says Nathan Davis Hunt, Program Director for the Interfaith Alliance of Colorado.

The Center for Responsible Lending is a member of the Colorado Financial Equity Coalition, a collection of public, private, and nonprofit organizations committed to bringing financial security to communities throughout Colorado. The coalition is leading an effort to qualify a ballot measure for the November 2018 election that would cap payday lending rates and fees at 36% in Colorado. Payday loans are currently exempted from Colorado’s 36% usury cap.

An APR cap of 36% or less disrupts the debt trap business model of payday lending and so offers citizens of 15 states and the District of Columbia who have them the strongest protections. Rate cap ballot measures have passed in four states by overwhelming majorities. People in states that once had triple-digit interest rate payday lending report relief after triple-digit interest loans were eliminated, and those jurisdictions save $2.2 billion per year.

Read the report.

More information on the Colorado Financial Equity Coalition.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Carol Hammerstein at