Proposition 111 in the 2018 Colorado election: what to know about the limitations of payday loans

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It is the one of the short term loans which do not require a background check.

Proposition 111 asks if Colorado should limit payday lending to curb what some are calling predatory business practices.

This is the language you will see on your ballot:

Proposition 111 proposes to amend the statutes of Colorado to:

  • reduce the total cost of a payday loan to an annual percentage rate of 36%; and
  • expand on what constitutes unfair or deceptive business practices for payday loans.

How will it work?

Currently, the annual percentage rates (APRs) on payday loans in Colorado can be as high as 180%. This includes fees and interest, and rates generally increase over the life of a loan. In 2016, the average APR rates for Coloradans were 129%. Proposition 111 would limit the APR on payday loans to 36%. It would also reduce the cost of obtaining such a loan from $ 293 to $ 53.

Who is for and who is against?

Colorado Springs Gazette Conservative Editorial Board announced an approval of Proposition 111, saying, “Predatory loans exploit human trauma in ways that civilized society should not allow.” At 36%, loan sharks will remain an option for people with sudden financial need. And at 36%, the borrower has some chance of deleveraging. At the other end of the political spectrum, Our Revolution, “the next step in Bernie Sanders’ movement,” also approved the measure.

Jon Caldara, of the Right-wing Independence Institute, opposes the measure, who said in an editorial that the measure assumes that the poor are “too stupid” to make good decisions when it comes to taking out short-term loans. Beyond that, he said, the high fees are only part of the business: “Payday lenders are no saints, but their customers are actually terrible credit risks. Many accumulate massive debts and then file for bankruptcy, leaving the lender with nothing. To make up for this loss, lenders charge extremely high rates and fees. Payday loan reform has also been implemented outside of Colorado. When the Consumer Financial Protection Bureau proposed new rules on short-term loans last year, an industry trade group says NPR that reform regulation could “cripple” the industry.

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