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April 11, 2023

House Advances Bill to Protect Consumers from Predatory Financial Products

DENVER, CO – The House passed a bill today on a preliminary vote to protect consumers from excessive fees on small loans. 

“Colorado has made great progress when it comes to cracking down on high-interest lending, specifically with payday loans, but we must do more to protect consumers,” said Rep. Mike Weissman, D-Aurora. “Our legislation saves consumers money by tackling alternative charge loans, a workaround utilized by lenders to assess high fees on hardworking Coloradans who need to borrow smaller amounts of money. We’re doing everything we can to save consumers money, cut back on problematic lending practices and protect Coloradans.”  

“Alternative charge loans are rebranded payday loans, except lenders can charge sky high fees amounting to steep effective APRs – our bill puts an end to that,” said Rep. Javier Mabrey, D-Denver. “When voters overwhelmingly passed Proposition 111 to tighten regulations on payday loans, the industry adapted and now Coloradans seeking loans of up to $1,000 are stuck in the same harmful cycle of debt. Our legislation reduces borrowing costs for consumers by limiting fees for alternative charge loans.”

HB23-1229 would protect consumers by limiting lender fees on alternative charge loans, which are short-term loans capped at $1,000. The bill would also increase the minimum term of an alternative charge loan from 90 days to 6 months, allowing more time for repayment. Separately, it would also ensure that out-of-state, state-chartered banks are subject to applicable Colorado lending laws when lending to Coloradans to protect borrowers and create uniformity within the state.

In 2018, Colorado voters overwhelmingly passed Proposition 111 to crack down on predatory payday loans with high annual percentage rates (APRs). Since then, some Colorado lenders have replaced their payday loans with alternative charge loans which are not required subject to the same consumer protections. This bill would close that workaround to prevent lenders from overcharging Coloradans for credit that is often sought by borrowers already in duress.

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