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Message to the People in Colorado Regarding Proposed Legislation

Message from the President

One of the Colorado State Representatives is trying to introduce new legislation to cap interest rates at 36% to end Payday Loans in the entire state of Colorado.

My name is Eric Graning and I own Loan Stop, a Colorado corporation issuing payday loans since 1995. I am proud of the service we provide to our customers. I have listened to the arguments against our industry for years, but I feel people are misled and misunderstand our industry. Please consider this:

Loan Stop charges a $30 fee for a $300 cash advance for 2 weeks. This is a FEE for providing a valuable and popular service. It is nothing more than that.

True, we are required to disclose this in the form of an Annual Percentage Rate (APR) which, due to such a short time period on such a small dollar amount, reflects a high APR. However, that is like trying to associate an APR for the fee charged on withdrawing money from an ATM. In fact, all the major banks have been issuing payday loans straight from an ATM without disclosing any terms or conditions or APR’s because they call it a “checking account advance fee”. Because they are distinguishing it as a “processing fee”, they are not required to disclose anything. In fact, any law that the State of Colorado passes, FEDERALLY CHARTERED BANKS DO NOT NEED TO COMPLY. Nor do they disclose any terms to the consumer, do not allow free payment plans, and they break almost every current law under Colorado's current system!

http://www.businessweek.com/news/2010-02-23/banks-may-use-payday-style-loans-to-replace-lost-overdraft-fees.html

Is a $30 fee for $300 really excessive?

Considering all the allowable fees in every other industry?

$150 documentation fee (or more) in the auto industry (in addition to a $500 or more “dealer and handling” fee)
$300 application fee for a mortgage?
$30 credit report fee in addition to the application fee?
$35 bounce check fee?
$45 late payment for on a $100 minimum payment?
How about $5 in fees to get $40 out of an ATM! (12.5% and we only charge 10%)
The list could go on for days!

NONE OF THESE FEES ARE EVER ADDED IN CALCULATING AN A.P.R. EXCEPT FOR IN THE PAYDAY LOAN INDUSTRY!

A popular argument against our industry keeps talking about these “debt traps” people are forced into.

FACT: Between 10% and 15% of all the money we have loaned out in every office is being paid down in a FREE, NO COST payment plan. No additional fees! (Unlike any other industry in this country) People are charged a reasonable fee up front with no hidden late payment fees, and offered a great option to pay down there loan free of charge in the event they needed our service 4 times in a row.

Finding a victim whom was taken advantage of is easy to do in every industry, but it is not the norm.

I have had a Division of Banking auditor in Montana and another auditor here in Colorado both tell me that more than 95% of all customer complaints that come into their office are from unlicensed, online payday loan providers. The State of Colorado has identified many of these companies and is unable to do anything about them. Some of them are incorporated in another country and some are located on Indian Reservations. In either case, they either cannot or will not pursue them.

What happens if an interest rate cap goes into effect?

Legally operating payday loan companies will shut down and leave over 2000 Coloradans without jobs. Hundreds of store fronts will be vacated leaving landlords with massive amounts of empty space they are already struggling to fill.
Banks will have no competition and be able to cherry pick only the best customers to issue payday loans to. (which is what they do now)
Illegal Online loan companies will have no competition and charge rates 2 to 3 times what current loan companies are charging now.
Customers will be left with no choices! If you are in a cash crunch and need a quick fix to temporarily get you by, you will be stuck.

Our industry is terribly misunderstood! I have had thousands of people tell me that we were a lifeline when they were in a bind.

Our service provides people a quick, easy solution to short term problems.

Many times people need a quick fix while they put together a long term solution.
Other times, a short term fix is all you need to get yourself back on track.
And sometimes, people can use a little extra cash on vacation and it’s not really needed or a problem, it’s just nice to have that flexibility.

No mater what the reason people use our service; it often comes in handy and a mere $30 fee for $300 extra cash is more than reasonable!

To Help, contact your State Representatives immediately and tell them to vote no on an interest rate cap.
(visit www.votesmart.org to find your Representative)