COLORADO – The Associated Press has said Colorado voters have approved Proposition 111, which cuts the interest rate on payday loans to 36%. It also eliminates all other finance charges and fees associated with payday loans.
Proposition 111 – Payday loan limit
| Yes | 1 859 517 | 77 |
| No | 547,608 |
Currently in Colorado, when someone wants to get a payday loan, they can face interest rates of around 200 percent on the high end. 15 states and the District of Columbia have enacted similar laws to cap payday loan interest rates.
Argument for
1) Colorado residents pay too much to borrow small amounts of money from payday lenders. The APR for
these loans can exceed 180 percent. Some consumers borrow money to pay off other payday loans,
which leads to a cycle of debt. As the measure reduces the high cost of payday loans, consumers
may be better able to repay their loans and avoid further financial stress.
Argument against
1) This can eliminate payday loan business in Colorado. Payday loans provide options for
consumers who may not be eligible for other types of credit. With limited or no access to these loans,
consumers may pay higher fees to other creditors for late payments, bad checks, overdrafts or public service
disconnect the fees or use unregulated lenders for higher cost loans. This measure is unnecessary
because the state legislature passed reforms in 2010 that led to lower loan costs and fewer defaults,
while ensuring that consumers have access to a well-regulated source of short-term credit.
Estimate of the tax impact
State revenue and expenditure. If Proposition 111 causes payday lenders to choose not to renew their
licensing, there will be a reduction in fee income for the Law Department.
