Colorado Groups Join National Payday Lending Protest
DENVER - It's toxic. That's the message consumer watchdog groups are sending on this "National Day of Action Against Payday Lenders."
After state legislation passed in 2010, payday-lending companies have had relatively tougher laws to follow in Colorado than in neighboring states. There's now a 45 percent cap on interest rates, and borrowers must be given at least six months to repay their loans.
Despite the revised laws, Caroline Casteel, an organizer with the Colorado Progressive Coalition, says the steps haven't stopped people from getting loans they can't afford.
"The data shows it's not quite enough," she says. "It's still a dangerous and unaffordable product. The default rate in 2013, according to the Attorney General's office, was 38 percent, which is still pretty high."
The payday lending industry has been vocal about serving people who don't need large enough amounts to borrow from banks, and advising them to use credit responsibly. But protests being held today are calling for stronger rules from the federal Consumer Financial Protection Bureau. Today's protest in Denver involves cordoning off a lender's storefront as a mock "hazardous waste site."
Another strategy is to raise kids who won't need payday loans as adults. Colorado schools have personal financial literacy expectations in social studies curriculum, but some high schools are amplifying the message - literally. A nonprofit called Funding the Future is promoting assemblies featuring the rock band GOODING.
The lead singer, also named "Gooding," says the music isn't about money - but it's a chance to get kids talking about it.
"We've been to a couple of schools in Denver where it's 80, 90 percent free and reduced [price] lunch," he says. "I have kids come up to me and say, 'I'm trying to save, but you know, my parents are struggling so much, they take my money.' The reason we're so heavy on high schools right now is we're touched by the response - we just cannot believe it."
Gooding says the show includes messages about the importance of self-reliance, planning for the future, and not buying into what he calls the "hype of overnight success" based on actors and athletes.
Sacha Millstone is senior vice president of investments at the financial advisory firm Raymond James, which sponsors similar concerts. She says payday loans tend to hurt those most economically vulnerable.
"The annual percentage rate of these loans is usually very high, 390 percent or more," she says. "Payday loans are currently regulated on a state-by-state basis, with some states allowing annual percentage rates of up to 1,400 percent. My view is regulation should protect all citizens and prohibit such predatory lending practices nationwide."
GOODING will visit more Colorado schools this spring, including Longmont High School in Longmont on April 2, Mead High School in Mead on April 3, and Arapahoe Ridge/Boulder Tech in Boulder on April 10.