It was a cold October morning and Reverend Timothy Tyler was preaching from a corner of Denver’s 16th Street Mall.
“It is time for people of conscience to unite to do what is right, to begin the process of uplifting those who cannot elevate themselves! said the pastor of Shorter Community AME Church, his thunderous voice echoing through the busiest concrete hallway in downtown Denver.
About 20 people were crowded around him – some dressed for worship, others wearing toothy “loan shark” headdresses – nodding in approval and chanting “Vote yes on Proposition 111!” “
The statewide measure on the November ballot aims to limit the total interest and fees charged by payday lenders to 36%. In 2016, Colorado’s average rate was 129%, almost eight times higher than the current rate record 17.07 annual percentage rate (APR) on a credit card.
Religious leaders, economic justice advocates, ex-combatants, elected officials from both parties and civil rights organizations rallied around the initiative to curb one of the country’s most predatory lending practices. Colorado. Although lenders say the measure will force them out of business, as similar initiatives have done in other recently regulated states, they have so far held no opposition in Colorado.
Kym Ray was at the rally that morning, gently cradling the stroller that held his daughter, Layla, as Tyler spoke. She knows how easy it can be to fall prey to a payday loan.
“I had to make up the difference to pay my mortgage,” she said. “I just saw their storefront sign, got a ‘yes’ … and the rest is history.”
She said she first applied for a loan from her local Wells Fargo, but was turned down. It ultimately took him three months and a second job to pay off over $ 125 in interest on his $ 500 loan.
Payday loans are not only expensive, they are complex. The actual cost combines origination fees, interest payments, and monthly maintenance fees. According to Colorado Attorney General’s Office, a loan of $ 392 in 2016 cost the borrower an average of $ 119 in additional fees. This year, 23 percent Colorado payday loans ended in default.
“It sounds like easy money, but it’s not easy money, and it can trick you in so many different ways,” Tyler said, reflecting on the experiences of several of his followers who were drawn to through payday loans.
Corrine Fowler, another proponent of the measure, said: “If you’re an individual who needs a $ 400 loan to cover yourself and make ends meet, you just won’t have an extra $ 100. plus the $ 400 to reimburse it. in very little time.”
Payday windows are proliferating In areas of moderate poverty, communities with a high percentage of residents under the age of 15 (a metric that researchers use to indicate large families) and communities with large African American populations. Veterans are often targeted, as are those who are isolated, including the elderly or victims of domestic violence.
“Often the people who live in these neighborhoods don’t always have alternatives,” said Ray, an active member of the NAACP.
“The issue of access to resources, especially when survivors leave abusers who may have financial control of the relationship, is a constant concern,” added Anne Tapp, executive director of the Safehouse Progressive Alliance for Nonviolence in Boulder. .
As high as Colorado’s triple-digit APR may seem, it’s tame compared to some other states where the statutory rates rise above 600 percent. This is largely due to state legislation passed in 2010 that caps fees, lengthens repayment periods, and limits borrowers’ ability to take out new loans to cover outstanding loans. Since then, the volume of payday loans has decreased significantly, by around 25%, according to Colorado Attorney General’s Office. The windows disappeared much faster. Of 505 payday loan stores operating statewide in 2009, only 180 were left seven years later.
“There’s hardly anyone around anymore,” said Josh, manager of Paycheck Loans at Englewood, who declined to share his last name for this story. “[We’re] just trying to keep the people we’ve employed for the past 20 years.
Jamie Fulmer is the senior vice president of Advance America, a national payday lender with 19 locations in Colorado. His The data of 2012 shows that payday loans are cheaper than bank overdraft fees or utility reconnection fees. “We have confidence in the American consumer and we believe that they are wise enough to assess the various options available to them,” he said.
Jon Caldara, director of the Independence Institute, a free market think tank in Denver, is one of the few Coloradians outside the industry to speak out publicly in defense of payday lenders. “The reason they charge these ridiculous rates is that the loans are so risky,” he said.
Fulmer’s 2012 data showed that 97% of Advance America’s loans are ultimately repaid. The longer the repayment, the more the creditor earns.
As Tyler and other Proposition 111 supporters chanted this freezing morning outside the ACE Cash Express on 16th Street, the store interior was calm and warm. “Do you want to round up to 21 cents for cancer research?” An employee by the name of Melissa quietly asked her only customer. Borrowers generally report positive experiences in person, according to Pew Charitable Trust Research, and 60 percent think in-store payday loans are more helpful than harmful.
“I have clients who buy me gifts when they go on vacation because no one else will help them, ”said Josh, the payday loan manager. “Of course if you want to get rid of us just give our customers a way to go, and that’s unregulated, more expensive online loans, that’s the answer.”
“And no one will do anything about it.”
South Dakota passed a measure limiting interest rates and fees on payday loans in 2016. After just two months, 25 percent of lenders in this state were gone. Montana’s adoption of a similar initiative in 2010 had an unintended consequence: the number of complaints against online payday lenders rose from 1 to 101 over the next three years.
Yet Montana Assistant Attorney General Chuck Munson said those numbers were misleading because in six years they had fallen back into the numbers. He attributed much of the initial peak to a handful of borrowers who have taken out many loans from different lenders.
“Over time people adjust and they don’t necessarily look for the easy loans,” Munson said. “[They] are looking for other ways out, whatever they may be.
National statistics support this scenario: the number of adults who report Using a payday loan online in the past year is only 6.5% higher in states with strict restrictions than the national figure.
One thing, however, has changed since neighbors to northern Colorado adopted their own price caps. Industry funding to oppose these ballot initiatives has disappeared. Just two years ago in South Dakota, predatory loan companies spent $ 1.3 million to oppose that state’s version of Proposition 111 – most of Select Management Resources. , based in Georgia, the rest of Advance America.
In Colorado, no contributions to any opposition group had been reported at the time of writing, while supporters have raised $ 1.7 million in combined cash and in-kind contributions to campaign for the Proposition 111. Of that amount, more than $ 1.6 million came from The Sixteen Thirty Fund, a Washington, DC-based rights organization that raises funds to support a wide variety of progressive causes.
Advance America’s Fulmer declined to comment on any strategy in Colorado, where the ballots have already been mailed.
But supporters won’t be surprised to see the industry weigh in against Proposition 111 at the last minute. In South Dakota, Advance America funded its opposition to that state’s measure just eight days before the election. “We’re on the edge of our seat, constantly asking ourselves when they’re going to show up,” Fowler said, speculating that payday lenders might hope to get around Proposition 111 with help from the federal government.
Under the Obama administration, the Consumer Financial Protection Bureau issued a rule limiting both the amount of credit payday lenders could offer and the range of fees they could charge. In January, the acting director of the CFPB, Mick Mulvaney August 19, 2019. CFPB also dropped lawsuits against four predatory payday lenders accused of charging more than 950% of the APR. Since 2009, the Bureau’s intention to review the rule, but the date of entry into force of most provisions remains Advance America – headquartered in the Congressional District of South Carolina that Mulvaney previously represented – had to pay $ 40 million to settle similar cases across the country.
It’s hard to speculate on what steps the federal government might take to protect predatory lenders in the future, but in the short term the number of options available to those looking for a payday loan in Colorado is likely to decline significantly. if Proposition 111 is adopted in November. “I would say that is definitely going to happen,” Fulmer said when asked if Advance America would shut down sites under the new price cap. “All.”
Fowler suggested alternative sources. “There are other loan products on the market; there is your grandmother to borrow money from, friends, relatives, there is your church to help you, ”she said. According to Pew research41% of payday borrowers end up turning to one of these resources to pay off a bloated loan bill, and a large majority would prefer tighter industry regulation. Yet 37% still said they were desperate enough to have taken out a loan at any cost.
“If exploitative businesses that target vulnerable people while living on the brink of poverty are the only solution, that says a lot about us as a community,” Safehouse’s Tapp said.
After his sermon, Tyler said it was incumbent on religious leaders not only to speak out against public policies that harm their herds, but also to “bring in something that fixes the problem.”
“To do nothing,” he said, “would be unreasonable. “
An earlier version of this story mistakenly attributed a payday loan profit statement to Jamie Fulmer, Senior Vice President of Advance America. He also incorrectly listed Mick Mulvaney’s title and the deadline for compliance with a new CPFB rule on payday loans. We apologize for any mistakes.