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By Phillip Lee

Colorado

Colorado consumers will be allowed to recoup part of their origination fee from payday loans if they make full repayment early.

In May, Gov. Bill Ritter signed legislation capping loan rates at 45 percent and changing the repayment schedule from two weeks to a minimum of six months.

When the proposed rules of the law were written in July, consumer groups charged that a loophole was created allowing “the industry to craft loan products and strategies that would steer consumers to take out new loans, by for example lowering interest rates in order to collect repeat origination fees.”

After listening to testimony from the state senators, who sponsored the bill, consumer groups and payday lenders, Colorado assistant attorney general Laura Udis ruled that payday lenders are not entitled to keep the entire origination fee if a consumer repays a loan in full early.

The origination fee, of up to $75, will be refunded in a prorated basis to consumers who repay early.

The rules will take effect November 29.

Key provisions in the Colorado law:

• A lender may charge a finance charge for each deferred deposit loan or payday loan that may not exceed 20 percent of the first $300 loaned plus 7.5 percent of any amount loaned in excess of $300. Such charge shall be deemed fully earned as of the date of the transaction. The lender may also charge an interest rate of 45 percent per annum for each deferred deposit loan or payday loan. If the loan is prepaid prior to the maturity of the loan term, the lender shall refund to the consumer a prorated portion of the annual percentage rate based upon the ratio of time left before maturity to the loan term. In addition, the lender may charge a monthly maintenance fee for each outstanding deferred deposit loan, not to exceed $7.50 per $100 loaned, up to $30 per month. The monthly maintenance fee may be charged for each month the loan is outstanding 30 days after the date of the original loan transaction.

• A lender shall not lend an amount greater than $500 nor shall the amount financed exceed $500 by any one lender at any time to a consumer.  A lender can make more than one loan to a consumer so long as the total amount financed does not exceed $500 at any one time and there is at least a 30-day waiting period between loans.

• Upon renewal of a deferred deposit loan, the lender may assess an additional finance charge not to exceed an annual percentage rate of 45 percent. If the deferred deposit loan is renewed prior to the maturity date, the lender shall refund to the consumer a prorated portion of the finance charge based upon the ratio of time left before maturity to the loan term.

Montana

After a battle in the Montana Supreme Court, state voters will decide in November whether to approve a payday lending law that caps rates at 36 percent.

The Montana Consumer Finance Association and Bernard Harrington, treasurer for the Coalition for Consumer Choice Against I-164, filed a lawsuit in the Montana Supreme Court to invalidate the initiative and pull it off the ballot.

The lawsuit contended that the ballot statements prepared by Attorney General Steve Bullock’s office failed to meet requirements of state law, were inaccurate and weren’t impartial.

The Court ruled 4-2 to allow the initiative to appear on the ballot, but to slightly amend the for-and-against statements and the statement of purpose on the ballot.

The ballot:

INITIATIVE NO. 164
A LAW PROPOSED BY INITIATIVE PETITION
Under Montana law, deferred deposit (payday) lenders may charge fees equaling one-fourth of the loan, which, as an annual interest rate could range from 300 percent to 650 percent. Title lenders may charge similar interest rates. I-164 reduces the interest, fees, and charges that payday lenders, title lenders, retail installment lenders, and consumer loan licensees may charge to an annual interest rate of 36 percent. It prohibits businesses from structuring other transactions to avoid the rate limit. It also revises statutes applicable to pawn brokers and junk dealers.
I-164 reduces the licenses and examination fee revenue paid to the State because certain lenders may not renew their licenses.
[ ]  FOR reducing the annual interest, fees, and charges payday, title, and retail installment lenders and consumer loan licensees may charge on loans to 36 percent.
[ ] AGAINST reducing the annual interest, fees, and charges payday, title, and retail installment lenders and consumer loan licensees may charge on loans to 36 percent.

INITIATIVE NO. 164 A LAW PROPOSED BY INITIATIVE PETITIONUnder Montana law, deferred deposit (payday) lenders may charge fees equaling one-fourth of the loan, which, as an annual interest rate could range from 300 percent to 650 percent. Title lenders may charge similar interest rates. I-164 reduces the interest, fees, and charges that payday lenders, title lenders, retail installment lenders, and consumer loan licensees may charge to an annual interest rate of 36 percent. It prohibits businesses from structuring other transactions to avoid the rate limit. It also revises statutes applicable to pawn brokers and junk dealers. I-164 reduces the licenses and examination fee revenue paid to the State because certain lenders may not renew their licenses. [ ]  FOR reducing the annual interest, fees, and charges payday, title, and retail installment lenders and consumer loan licensees may charge on loans to 36 percent. [ ] AGAINST reducing the annual interest, fees, and charges payday, title, and retail installment lenders and consumer loan licensees may charge on loans to 36 percent.


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